UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2020March 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From                     to                     
Commission File Number 1-12001
 ALLEGHENY TECHNOLOGIES INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware25-1792394
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification No.)
1000 Six PPG Place
Pittsburgh,Pennsylvania15222-5479
(Address of Principal Executive Offices)(Zip Code)
(412) 394-2800
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common stock, par value $0.10ATINew York Stock Exchange
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes      No  
Indicate by check mark whether the Registrant submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes      No  
At July 17, 2020,April 16, 2021, the registrant had outstanding 126,814,081127,203,072 shares of its Common Stock.



ALLEGHENY TECHNOLOGIES INCORPORATED
SEC FORM 10-Q
Quarter Ended June 30, 2020March 31, 2021
INDEX
 Page No.
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Statements of Cash Flows
Statements of Changes in Consolidated Equity
Notes to Consolidated Financial Statements
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
SIGNATURES



PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Allegheny Technologies Incorporated and Subsidiaries
Consolidated Balance Sheets
(In millions, except share and per share amounts)
(Current period unaudited)
June 30,
2020
December 31,
2019
March 31,
2021
December 31,
2020
ASSETSASSETSASSETS
Current Assets:Current Assets:Current Assets:
Cash and cash equivalentsCash and cash equivalents$539.1  $490.8  Cash and cash equivalents$541.7 $645.9 
Accounts receivable, netAccounts receivable, net483.6  554.1  Accounts receivable, net423.9 345.8 
Short-term contract assetsShort-term contract assets41.6  38.5  Short-term contract assets42.0 38.9 
Inventories, netInventories, net1,103.5  1,155.3  Inventories, net1,047.8 997.1 
Prepaid expenses and other current assetsPrepaid expenses and other current assets33.8  64.3  Prepaid expenses and other current assets38.0 38.3 
Total Current AssetsTotal Current Assets2,201.6  2,303.0  Total Current Assets2,093.4 2,066.0 
Property, plant and equipment, netProperty, plant and equipment, net2,455.0  2,450.1  Property, plant and equipment, net1,478.7 1,469.2 
GoodwillGoodwill236.4  525.8  Goodwill241.6 240.7 
Other assetsOther assets276.4  355.7  Other assets254.8 259.0 
Total AssetsTotal Assets$5,169.4  $5,634.6  Total Assets$4,068.5 $4,034.9 
LIABILITIES AND EQUITYLIABILITIES AND EQUITYLIABILITIES AND EQUITY
Current Liabilities:Current Liabilities:Current Liabilities:
Accounts payableAccounts payable$275.8  $521.2  Accounts payable$324.8 $290.6 
Short-term contract liabilitiesShort-term contract liabilities109.8  78.7  Short-term contract liabilities118.7 111.8 
Short-term debt and current portion of long-term debtShort-term debt and current portion of long-term debt12.8  11.5  Short-term debt and current portion of long-term debt15.7 17.8 
Other current liabilitiesOther current liabilities216.0  237.8  Other current liabilities230.0 233.1 
Total Current LiabilitiesTotal Current Liabilities614.4  849.2  Total Current Liabilities689.2 653.3 
Long-term debtLong-term debt1,516.9  1,387.4  Long-term debt1,598.4 1,550.0 
Accrued postretirement benefitsAccrued postretirement benefits303.9  312.5  Accrued postretirement benefits321.7 326.7 
Pension liabilitiesPension liabilities685.0  731.5  Pension liabilities642.8 673.6 
Other long-term liabilitiesOther long-term liabilities206.9  160.8  Other long-term liabilities207.1 189.9 
Total LiabilitiesTotal Liabilities3,327.1  3,441.4  Total Liabilities3,459.2 3,393.5 
Equity:Equity:Equity:
ATI Stockholders’ Equity:ATI Stockholders’ Equity:ATI Stockholders’ Equity:
Preferred stock, par value $0.10: authorized-50,000,000 shares; issued-NaNPreferred stock, par value $0.10: authorized-50,000,000 shares; issued-NaN—  —  Preferred stock, par value $0.10: authorized-50,000,000 shares; issued-NaN
Common stock, par value $0.10: authorized-500,000,000 shares; issued-126,813,383 shares at June 30, 2020 and 126,695,171 shares at December 31, 2019; outstanding-126,813,078 shares at June 30, 2020 and 126,085,348 shares at December 31, 201912.7  12.7  
Common stock, par value $0.10: authorized-500,000,000 shares; issued-127,429,740 shares at March 31, 2021 and 126,820,440 shares at December 31, 2020; outstanding-127,203,072 shares at March 31, 2021 and 126,817,768 shares at December 31, 2020Common stock, par value $0.10: authorized-500,000,000 shares; issued-127,429,740 shares at March 31, 2021 and 126,820,440 shares at December 31, 2020; outstanding-127,203,072 shares at March 31, 2021 and 126,817,768 shares at December 31, 202012.7 12.7 
Additional paid-in capitalAdditional paid-in capital1,617.8  1,618.0  Additional paid-in capital1,580.5 1,625.5 
Retained earningsRetained earnings1,277.6  1,679.3  Retained earnings103.0 106.5 
Treasury stock: 305 shares at June 30, 2020 and 609,823 shares at December 31, 2019—  (18.2) 
Treasury stock: 226,668 shares at March 31, 2021 and 2,672 shares at December 31, 2020Treasury stock: 226,668 shares at March 31, 2021 and 2,672 shares at December 31, 2020(4.7)
Accumulated other comprehensive loss, net of taxAccumulated other comprehensive loss, net of tax(1,172.8) (1,201.7) Accumulated other comprehensive loss, net of tax(1,208.6)(1,223.6)
Total ATI stockholders’ equityTotal ATI stockholders’ equity1,735.3  2,090.1  Total ATI stockholders’ equity482.9 521.1 
Noncontrolling interestsNoncontrolling interests107.0  103.1  Noncontrolling interests126.4 120.3 
Total EquityTotal Equity1,842.3  2,193.2  Total Equity609.3 641.4 
Total Liabilities and EquityTotal Liabilities and Equity$5,169.4  $5,634.6  Total Liabilities and Equity$4,068.5 $4,034.9 

The accompanying notes are an integral part of these statements.
1


Allegheny Technologies Incorporated and Subsidiaries
Consolidated Statements of Operations
(In millions, except per share amounts)
(Unaudited)
 
Three months ended June 30,Six months ended June 30,Three months ended March 31,
2020201920202019 20212020
SalesSales$770.3  $1,080.4  $1,725.8  $2,085.2  Sales$692.5 $955.5 
Cost of salesCost of sales695.6  902.7  1,516.3  1,776.4  Cost of sales606.7 820.7 
Gross profitGross profit74.7  177.7  209.5  308.8  Gross profit85.8 134.8 
Selling and administrative expensesSelling and administrative expenses44.4  67.7  102.8  135.7  Selling and administrative expenses54.0 58.4 
Impairment of goodwill287.0  —  287.0  —  
Restructuring chargesRestructuring charges16.7  —  24.7  —  Restructuring charges8.0 
Operating (loss) income(273.4) 110.0  (205.0) 173.1  
Operating incomeOperating income31.8 68.4 
Nonoperating retirement benefit expenseNonoperating retirement benefit expense(11.2) (18.4) (22.4) (36.7) Nonoperating retirement benefit expense(6.8)(11.2)
Interest expense, netInterest expense, net(21.7) (25.9) (43.6) (50.7) Interest expense, net(23.4)(21.9)
Debt extinguishment charge(21.5) —  (21.5) —  
Other income (expense), netOther income (expense), net0.5  18.6  (0.4) 15.7  Other income (expense), net1.5 (0.9)
(Loss) income before income taxes(327.3) 84.3  (292.9) 101.4  
Income before income taxesIncome before income taxes3.1 34.4 
Income tax provisionIncome tax provision92.6  5.8  103.4  6.6  Income tax provision5.5 10.8 
Net (loss) income(419.9) 78.5  (396.3) 94.8  
Net income (loss)Net income (loss)(2.4)23.6 
Less: Net income attributable to noncontrolling interestsLess: Net income attributable to noncontrolling interests2.7  3.4  5.2  4.7  Less: Net income attributable to noncontrolling interests5.5 2.5 
Net (loss) income attributable to ATI$(422.6) $75.1  $(401.5) $90.1  
Net income (loss) attributable to ATINet income (loss) attributable to ATI$(7.9)$21.1 
Basic net (loss) income attributable to ATI per common share$(3.34) $0.60  $(3.18) $0.72  
Basic net income (loss) attributable to ATI per common shareBasic net income (loss) attributable to ATI per common share$(0.06)$0.17 
Diluted net (loss) income attributable to ATI per common share$(3.34) $0.54  $(3.18) $0.66  
Diluted net income (loss) attributable to ATI per common shareDiluted net income (loss) attributable to ATI per common share$(0.06)$0.16 
The accompanying notes are an integral part of these statements.

2


Allegheny Technologies Incorporated and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(In millions)
(Unaudited)
 
Three months ended June 30,Six months ended June 30,Three months ended March 31,
2020201920202019 20212020
Net (loss) income$(419.9) $78.5  $(396.3) $94.8  
Net income (loss)Net income (loss)$(2.4)$23.6 
Currency translation adjustmentCurrency translation adjustmentCurrency translation adjustment
Unrealized net change arising during the periodUnrealized net change arising during the period14.2  (8.5) (9.2) 2.5  Unrealized net change arising during the period(4.8)(23.4)
DerivativesDerivativesDerivatives
Net derivatives gain (loss) on hedge transactionsNet derivatives gain (loss) on hedge transactions2.0  (5.7) (10.3) 4.8  Net derivatives gain (loss) on hedge transactions0.4 (12.3)
Reclassification to net income (loss) of net realized loss4.2  0.5  6.0  1.4  
Reclassification to net income (loss) of net realized (gain) lossReclassification to net income (loss) of net realized (gain) loss(1.7)1.8 
Income taxes on derivative transactionsIncome taxes on derivative transactions2.5  —  —  —  Income taxes on derivative transactions(2.5)
TotalTotal3.7  (5.2) (4.3) 6.2  Total(1.3)(8.0)
Postretirement benefit plansPostretirement benefit plansPostretirement benefit plans
Actuarial lossActuarial lossActuarial loss
Amortization of net actuarial lossAmortization of net actuarial loss21.3  21.8  42.6  43.5  Amortization of net actuarial loss22.2 21.3 
Prior service costPrior service costPrior service cost
Amortization to net income (loss) of net prior service creditsAmortization to net income (loss) of net prior service credits(0.8) (0.6) (1.5) (1.2) Amortization to net income (loss) of net prior service credits(0.5)(0.7)
Income taxes on postretirement benefit plansIncome taxes on postretirement benefit plans(4.9) —  —  —  Income taxes on postretirement benefit plans4.9 
TotalTotal25.4  21.2  41.1  42.3  Total21.7 15.7 
Other comprehensive income, net of tax43.3  7.5  27.6  51.0  
Comprehensive (loss) income(376.6) 86.0  (368.7) 145.8  
Less: Comprehensive income (loss) attributable to noncontrolling interests2.2  (0.2) 3.9  6.3  
Comprehensive (loss) income attributable to ATI$(378.8) $86.2  $(372.6) $139.5  
Other comprehensive income (loss), net of taxOther comprehensive income (loss), net of tax15.6 (15.7)
Comprehensive incomeComprehensive income13.2 7.9 
Less: Comprehensive income attributable to noncontrolling interestsLess: Comprehensive income attributable to noncontrolling interests6.1 1.7 
Comprehensive income attributable to ATIComprehensive income attributable to ATI$7.1 $6.2 
The accompanying notes are an integral part of these statements.

3


Allegheny Technologies Incorporated and Subsidiaries
Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
 
Six months ended June 30,Three months ended March 31,
20202019 20212020
Operating Activities:Operating Activities:Operating Activities:
Net (loss) income$(396.3) $94.8  
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Net income (loss)Net income (loss)$(2.4)$23.6 
Adjustments to reconcile net income (loss) to net cash used in operating activities:Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortizationDepreciation and amortization72.9  77.6  Depreciation and amortization36.1 37.3 
Deferred taxesDeferred taxes98.1  2.7  Deferred taxes(0.4)8.3 
Impairment of goodwill287.0  —  
Debt extinguishment charge21.5  —  
Net gains from disposal of property, plant and equipmentNet gains from disposal of property, plant and equipment(2.5) (28.3) Net gains from disposal of property, plant and equipment(1.2)(2.5)
Loss from sale of business—  7.7  
Changes in operating assets and liabilities:Changes in operating assets and liabilities:Changes in operating assets and liabilities:
InventoriesInventories51.8  (36.6) Inventories(50.8)(25.8)
Accounts receivableAccounts receivable70.5  (77.7) Accounts receivable(78.1)(39.2)
Accounts payableAccounts payable(245.4) (77.5) Accounts payable34.1 (96.5)
Retirement benefitsRetirement benefits(17.0) (34.2) Retirement benefits(16.6)(23.0)
Accrued liabilities and otherAccrued liabilities and other45.0  (32.9) Accrued liabilities and other11.2 2.4 
Cash used in operating activitiesCash used in operating activities(14.4) (104.4) Cash used in operating activities(68.1)(115.4)
Investing Activities:Investing Activities:Investing Activities:
Purchases of property, plant and equipmentPurchases of property, plant and equipment(66.0) (51.3) Purchases of property, plant and equipment(26.4)(29.1)
Proceeds from sale of businesses, net of transaction costs—  33.4  
Proceeds from disposal of property, plant and equipmentProceeds from disposal of property, plant and equipment3.2  29.4  Proceeds from disposal of property, plant and equipment1.4 2.9 
OtherOther1.0  (0.1) Other(0.1)1.0 
Cash (used in) provided by investing activities(61.8) 11.4  
Cash used in investing activitiesCash used in investing activities(25.1)(25.2)
Financing Activities:Financing Activities:Financing Activities:
Borrowings on long-term debt385.0  —  
Payments on long-term debt and finance leasesPayments on long-term debt and finance leases(207.2) (3.3) Payments on long-term debt and finance leases(3.0)(2.0)
Net borrowings under credit facilities0.7  5.4  
Purchase of convertible note capped call(19.0) —  
Debt issuance costs(8.1) —  
Debt extinguishment charge(19.1) —  
Net borrowings (payments) under credit facilitiesNet borrowings (payments) under credit facilities(3.3)298.6 
Shares repurchased for income tax withholding on share-based compensation and otherShares repurchased for income tax withholding on share-based compensation and other(7.8) (9.9) Shares repurchased for income tax withholding on share-based compensation and other(4.7)(7.8)
Cash provided by (used in) financing activitiesCash provided by (used in) financing activities124.5  (7.8) Cash provided by (used in) financing activities(11.0)288.8 
Increase (decrease) in cash and cash equivalentsIncrease (decrease) in cash and cash equivalents48.3  (100.8) Increase (decrease) in cash and cash equivalents(104.2)148.2 
Cash and cash equivalents at beginning of periodCash and cash equivalents at beginning of period490.8  382.0  Cash and cash equivalents at beginning of period645.9 490.8 
Cash and cash equivalents at end of periodCash and cash equivalents at end of period$539.1  $281.2  Cash and cash equivalents at end of period$541.7 $639.0 
The accompanying notes are an integral part of these statements.

4


Allegheny Technologies Incorporated and Subsidiaries
Statements of Changes in Consolidated Equity
(In millions)
(Unaudited)

 ATI Stockholders  
Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Treasury
Stock
Accumulated
Other
Comprehensive
Income (Loss)
Non-
controlling
Interests
Total
Equity
Balance, March 31, 2019$12.7  $1,599.7  $1,437.0  $(19.7) $(1,095.5) $112.4  $2,046.6  
Net income—  —  75.1  —  —  3.4  78.5  
Other comprehensive income (loss)—  —  —  —  11.1  (3.6) 7.5  
Employee stock plans—  4.9  (0.3) 1.4  —  —  6.0  
Balance, June 30, 2019$12.7  $1,604.6  $1,511.8  $(18.3) $(1,084.4) $112.2  $2,138.6  
Balance, March 31, 2020$12.7  $1,592.1  $1,700.4  $(0.8) $(1,216.6) $104.8  $2,192.6  
Net (loss) income—  —  (422.6) —  —  2.7  (419.9) 
Other comprehensive income (loss)—  —  —  —  43.8  (0.5) 43.3  
Equity component of convertible note—  48.7  —  —  —  —  48.7  
Convertible note capped call—  (19.0) —  —  —  —  (19.0) 
Employee stock plans—  (4.0) (0.2) 0.8  —  —  (3.4) 
Balance, June 30, 2020$12.7  $1,617.8  $1,277.6  $—  $(1,172.8) $107.0  $1,842.3  

 ATI Stockholders  
Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Treasury
Stock
Accumulated
Other
Comprehensive
Income (Loss)
Non-
controlling
Interests
Total
Equity
Balance, December 31, 2018$12.7  $1,615.4  $1,422.0  $(30.6) $(1,133.8) $105.9  $1,991.6  
Net income—  —  90.1  —  —  4.7  94.8  
Other comprehensive income—  —  —  —  49.4  1.6  51.0  
Employee stock plans—  (10.8) (0.3) 12.3  —  —  1.2  
Balance, June 30, 2019$12.7  $1,604.6  $1,511.8  $(18.3) $(1,084.4) $112.2  $2,138.6  
Balance, December 31, 2019$12.7  $1,618.0  $1,679.3  $(18.2) $(1,201.7) $103.1  $2,193.2  
Net (loss) income—  —  (401.5) —  —  5.2  (396.3) 
Other comprehensive income (loss)—  —  —  —  28.9  (1.3) 27.6  
Equity component of convertible note—  48.7  —  —  —  —  48.7  
Convertible note capped call—  (19.0) —  —  —  (19.0) 
Employee stock plans—  (29.9) (0.2) 18.2  —  —  (11.9) 
Balance, June 30, 2020$12.7  $1,617.8  $1,277.6  $—  $(1,172.8) $107.0  $1,842.3  
 ATI Stockholders  
Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Treasury
Stock
Accumulated
Other
Comprehensive
Income (Loss)
Non-
controlling
Interests
Total
Equity
Balance, December 31, 2019$12.7 $1,618.0 $1,679.3 $(18.2)$(1,201.7)$103.1 $2,193.2 
Net income  21.1   2.5 23.6 
Other comprehensive loss— — — — (14.9)(0.8)(15.7)
Employee stock plans— (25.9)17.4 — — (8.5)
Balance, March 31, 2020$12.7 $1,592.1 $1,700.4 $(0.8)$(1,216.6)$104.8 $2,192.6 
Balance, December 31, 2020$12.7 $1,625.5 $106.5 $$(1,223.6)$120.3 $641.4 
Net income (loss)  (7.9)  5.5 (2.4)
Other comprehensive income— — — — 15.0 0.6 15.6 
Cumulative effect of adoption of new accounting standard— (49.8)4.4 — — — (45.4)
Employee stock plans— 4.8 (4.7)— — 0.1 
Balance, March 31, 2021$12.7 $1,580.5 $103.0 $(4.7)$(1,208.6)$126.4 $609.3 
The accompanying notes are an integral part of these statements.
5


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
Note 1. Accounting Policies
The interim consolidated financial statements include the accounts of Allegheny Technologies Incorporated and its subsidiaries. Unless the context requires otherwise, “Allegheny Technologies”, “ATI” and “the Company” refer to Allegheny Technologies Incorporated and its subsidiaries.
These unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and note disclosures required by U.S. generally accepted accounting principles for complete financial statements. In management’s opinion, all adjustments (which include only normal recurring adjustments) considered necessary for a fair presentation have been included. Certain prior year amounts have been reclassified in order to conform with fiscal year 2020 presentation. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 20192020 Annual Report on Form 10-K. The results of operations for these interim periods are not necessarily indicative of the operating results for any future period. The December 31, 20192020 financial information has been derived from the Company’s audited consolidated financial statements.
Effective January 1, 2020, the Company began operating under 2 revised business segments: High Performance Materials & Components (HPMC) and Advanced Alloys & Solutions (AA&S). HPMC is now comprised of the Specialty Materials and Forged Products businesses, as well as the ATI Europe distribution operations. The new AA&S segment combines the Specialty Alloys & Components (SAC) business, including the primary titanium operations in Richland, WA and Albany, OR, with ATI’s former Flat Rolled Products (FRP) business segment, which included the FRP business and the 60%-owned Shanghai STAL Precision Stainless Steel Company Limited (STAL), as well as the Uniti LLC (Uniti) and Allegheny & Tsingshan Stainless (A&T Stainless) 50%-owned joint ventures that are reported in AA&S segment results under the equity method of accounting. See Note 13, Business Segments, for further information. Financial results of aerospace-grade titanium plate products also transferred from HPMC to AA&S effective January 1, 2020. Prior period segment information has been restated to conform to this operating structure.

The Company’s collective bargaining agreements (CBAs) with the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied & Industrial Service Workers International Union, AFL-CIO, CLC (USW) involving approximately 1,500 full-time represented employees located primarily within the AA&S segment operations expired on February 29, 2020. On March 25, 2020, the Company announced an agreement with the USW that extended the terms of the expired CBAs for one year, to February 28, 2021.
New Accounting Pronouncements Adopted

In MarchAugust 2020, the Financial Accounting Standards Board (FASB) issued new optional accounting guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. In response to concerns about structural risks of interbank offered rates (IBORs), and, particularly, the risk of cessation of the London Interbank Offered Rate (LIBOR), regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation. The new accounting guidance provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The new accounting guidance applies only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments generally do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. Management is continuing to evaluate the issue, and presently does not expect a transition away from LIBOR, primarily involving ATI’s domestic credit facility and an interest rate swap contract, to have any significant financial impact to ATI.

In December 2019, the FASB issued new accounting guidance related to simplify the accounting for income taxes. The areasconvertible instruments. Under this new guidance, embedded conversion features are no longer separated from the host contract for simplificationconvertible instruments with conversion features that are not required to be accounted for as derivatives, or that do not result in substantial premiums accounted for as paid-in capital. As such, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. By removing those separation models, the guidance involve the removalreported interest rate of certain exceptionsconvertible debt instruments typically will be closer to the general principals in the current guidance, including intraperiod allocation and the calculation of income taxes in an interim period when a year to date loss exceeds the anticipated loss for the year.coupon interest rate. The new guidance also simplifies the accountingaddresses how convertible instruments are accounted for income taxes in the areadiluted earnings per share calculation, requiring the if-converted method, and requires enhanced disclosures about the terms of franchise taxes.convertible instruments and contracts in an entity’s own equity. This new guidance is effective for the Company in fiscal year 2021,2022, with early adoption permitted.
The Company adopted this new accounting guidance related to accounting for convertible instruments effective January 1, 2021 using the modified transition approach with the cumulative effect recognized as an adjustment to the opening balance of retained earnings. This new guidance is applicable to the Company’s 3.5% Convertible Senior Notes due 2025 (the 2025 Convertible Notes) that were issued in June 2020, for which the embedded conversion option was early adoptedrequired to be separately accounted for as a component of stockholders’ equity. Upon adoption on January 1, 2021, long-term debt increased by $45.4 million and stockholders’ equity decreased by the Companysame amount, representing the net impact of two adjustments: (1) the $49.8 million value of the embedded conversion, which is net of allocated offering costs, previously classified in additional paid-in capital in stockholders’ equity, and (2) a $4.4 million increase to retained earnings for the cumulative effect of adoption primarily related to the non-cash interest expense recorded in fiscal year 2020 without significantfor the amortization of the portion of the 2025 Convertible Notes allocated to stockholders�� equity. Prospectively, the reported interest expense for the 2025 Convertible Notes will no longer include the non-cash interest expense of the equity component as required under prior accounting standards and will be closer to the 3.5% cash coupon rate. There was no impact to the consolidated financial statements.Company’s earnings per share calculation as it previously applied the if-converted method to the 2025 Convertible Notes given ATI’s flexibility to settle conversions of the 2025 Convertible Notes in cash, shares of ATI’s common stock or a combination thereof, at ATI’s election.
6



In August 2018, the FASB issued new disclosure guidance on fair value measurement. This new guidance modifies the disclosure requirements on fair value measurements, including removal and modifications of various current disclosures as well as some additional disclosure requirements for Level 3 fair value measurements. Some of these disclosure changes must be applied prospectively while others retrospectively depending on the requirement. This guidance was adopted by the Company in fiscal year 2020 without an impact on the Company’s consolidated financial statements other than disclosures.
In June 2016, the FASB added a new impairment model (known as the current expected credit loss (CECL) model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses. The CECL model applies to trade receivables, other receivables, contract assets and most debt instruments. The CECL model does not have a minimum threshold for recognition of impairment losses, and entities will need to measure expected credit losses on assets that have a low risk of loss. This guidance was adopted by the Company in fiscal year 2020 without significant impact to the consolidated financial statements.
Note 2. Revenue from Contracts with Customers

Disaggregation of Revenue
The Company operates in 2 business segments: High Performance Materials & Components (HPMC) and Advanced Alloys & Solutions (AA&S). Revenue is disaggregated within these 2 business segments by diversified global markets, primary geographical markets and diversified products. Comparative information of the Company’s overall revenues (in millions) by global and geographical markets for the secondfirst quarters ended March 31, 2021 and six months ended June 30, 2020 and 2019 were as follows:
(in millions)Second quarter ended
June 30, 2020June 30, 2019
HPMCAA&STotalHPMCAA&STotal
Diversified Global Markets:
Aerospace & Defense$252.3  $113.3  $365.6  $444.8  $127.4  $572.2  
Energy*22.8  144.7  167.5  33.4  180.0  213.4  
Automotive1.0  49.8  50.8  3.1  70.5  73.6  
Food Equipment & Appliances0.1  47.1  47.2  —  49.6  49.6  
Electronics/Computers/Communications0.2  39.3  39.5  0.3  37.8  38.1  
Construction/Mining5.0  29.8  34.8  13.4  39.2  52.6  
Medical10.3  19.6  29.9  21.1  21.3  42.4  
Other9.0  26.0  35.0  17.0  21.5  38.5  
Total$300.7  $469.6  $770.3  $533.1  $547.3  $1,080.4  
(in millions)(in millions)Six Months Ended(in millions)First quarter ended
June 30, 2020June 30, 2019March 31, 2021March 31, 2020
HPMCAA&STotalHPMCAA&STotalHPMCAA&STotalHPMCAA&STotal
Diversified Global Markets:Diversified Global Markets:Diversified Global Markets:
Aerospace & DefenseAerospace & Defense$611.1  $247.0  $858.1  $845.4  $252.4  $1,097.8  Aerospace & Defense$179.8 $74.4 $254.2 $358.8 $133.7 $492.5 
Energy*Energy*46.9  291.2  338.1  61.5  320.4  381.9  Energy*30.5 118.6 149.1 24.1 146.5 170.6 
AutomotiveAutomotive3.0  124.3  127.3  6.7  143.8  150.5  Automotive2.0 89.5 91.5 2.0 74.5 76.5 
ElectronicsElectronics0.3 55.3 55.6 0.3 32.9 33.2 
Construction/MiningConstruction/Mining5.1 37.4 42.5 5.3 38.3 43.6 
Food Equipment & AppliancesFood Equipment & Appliances0.1  97.5  97.6  0.1  102.7  102.8  Food Equipment & Appliances35.4 35.4 50.4 50.4 
Construction/Mining10.3  68.1  78.4  31.9  78.6  110.5  
Electronics/Computers/Communications0.5  72.2  72.7  0.3  71.9  72.2  
MedicalMedical27.3  41.2  68.5  45.8  42.7  88.5  Medical11.2 17.8 29.0 17.0 21.6 38.6 
OtherOther21.8  63.3  85.1  38.0  43.0  81.0  Other12.0 23.2 35.2 12.8 37.3 50.1 
TotalTotal$721.0  $1,004.8  $1,725.8  $1,029.7  $1,055.5  $2,085.2  Total$240.9 $451.6 $692.5 $420.3 $535.2 $955.5 
*Includes the oil & gas, hydrocarbon and chemicaldownstream processing, and electricalspecialty energy markets.

7


(in millions)Second quarter ended
June 30, 2020June 30, 2019
HPMCAA&STotalHPMCAA&STotal
Primary Geographical Market:
United States$166.2  $311.0  $477.2  $290.2  $350.3  $640.5  
Europe92.0  32.4  124.4  160.9  46.3  207.2  
Asia27.6  91.1  118.7  49.4  122.5  171.9  
Canada5.1  11.1  16.2  14.9  14.5  29.4  
South America, Middle East and other9.8  24.0  33.8  17.7  13.7  31.4  
Total$300.7  $469.6  $770.3  $533.1  $547.3  $1,080.4  
(in millions)(in millions)Six Months Ended(in millions)First quarter ended
June 30, 2020June 30, 2019March 31, 2021March 31, 2020
HPMCAA&STotalHPMCAA&STotalHPMCAA&STotalHPMCAA&STotal
Primary Geographical Market:Primary Geographical Market:Primary Geographical Market:
United StatesUnited States$393.5  $689.8  $1,083.3  $559.2  $702.4  $1,261.6  United States$128.3 $271.6 $399.9 $227.3 $378.8 $606.1 
AsiaAsia20.1 122.6 142.7 25.1 94.2 119.3 
EuropeEurope225.5  70.0  295.5  319.5  98.7  418.2  Europe79.1 34.0 113.1 133.5 37.6 171.1 
Asia52.7  185.3  238.0  92.1  203.0  295.1  
CanadaCanada16.7  21.5  38.2  26.3  29.5  55.8  Canada8.2 9.1 17.3 11.6 10.4 22.0 
South America, Middle East and otherSouth America, Middle East and other32.6  38.2  70.8  32.6  21.9  54.5  South America, Middle East and other5.2 14.3 19.5 22.8 14.2 37.0 
TotalTotal$721.0  $1,004.8  $1,725.8  $1,029.7  $1,055.5  $2,085.2  Total$240.9 $451.6 $692.5 $420.3 $535.2 $955.5 
Comparative information of the Company’s major high-value and standard products based on their percentages of sales is included in the following table. In conjunction with the Company’s announced ongoing exit of standard stainless products, ATI reclassified certain items as High-Value Products within AA&S segment results. Prior period information reflects these reclassifications. Hot-Rolling and Processing Facility (HRPF) conversion service sales in the AA&S segment are excluded from this presentation.
Second quarter ended
June 30, 2020June 30, 2019
HPMCAA&STotalHPMCAA&STotal
Diversified Products and Services:
High-Value Products
     Nickel-based alloys and specialty alloys36 %26 %30 %37 %30 %33 %
     Titanium and titanium-based alloys29 %13 %19 %25 %10 %18 %
     Precision forgings, castings and components35 %— %14 %38 %— %19 %
     Precision rolled strip products— %19 %12 %— %21 %10 %
     Zirconium and related alloys— %14 %%— %11 %%
Total High-Value Products100 %72 %83 %100 %72 %86 %
Standard Products
     Standard stainless products— %28 %17 %— %28 %14 %
Total100 %100 %100 %100 %100 %100 %
Six Months EndedFirst quarter ended
June 30, 2020June 30, 2019March 31, 2021March 31, 2020
HPMCAA&STotalHPMCAA&STotalHPMCAA&STotalHPMCAA&STotal
Diversified Products and Services:Diversified Products and Services:Diversified Products and Services:
High-Value ProductsHigh-Value ProductsHigh-Value Products
Nickel-based alloys and specialty alloys Nickel-based alloys and specialty alloys38 %25 %31 %37 %26 %32 % Nickel-based alloys and specialty alloys36 %28 %31 %40 %31 %35 %
Precision rolled strip products Precision rolled strip products%31 %20 %%22 %12 %
Precision forgings, castings and components Precision forgings, castings and components43 %%15 %35 %%16 %
Titanium and titanium-based alloys Titanium and titanium-based alloys27 %12 %18 %25 %11 %18 % Titanium and titanium-based alloys21 %%12 %25 %11 %18 %
Precision forgings, castings and components35 %— %15 %38 %— %19 %
Precision rolled strip products— %21 %12 %— %22 %11 %
Zirconium and related alloys Zirconium and related alloys— %13 %%— %12 %% Zirconium and related alloys%15 %10 %%13 %%
Total High-Value ProductsTotal High-Value Products100 %71 %84 %100 %71 %86 %Total High-Value Products100 %81 %88 %100 %77 %88 %
Standard ProductsStandard ProductsStandard Products
Standard stainless products Standard stainless products— %29 %16 %— %29 %14 % Standard stainless products%19 %12 %%23 %12 %
TotalTotal100 %100 %100 %100 %100 %100 %Total100 %100 %100 %100 %100 %100 %
87


The Company maintained a backlog of confirmed orders totaling $1.51$1.5 billion and $2.38$2.1 billion at June 30,March 31, 2021 and 2020, and 2019, respectively. Due to the structure of the Company’s long-term agreements, approximately 70%75% of this backlog at June 30, 2020March 31, 2021 represented booked orders with performance obligations that will be satisfied within the next 12 months. The backlog does not reflect any elements of variable consideration.
Contract balances
As of June 30, 2020March 31, 2021 and December 31, 2019,2020, accounts receivable with customers were $488.1$428.1 million and $558.7$350.1 million, respectively. The following represents the rollforward of accounts receivable - reserve for doubtful accounts and contract assets and liabilities for the sixthree months ended June 30, 2020March 31, 2021 and 2019:2020:
(in millions)(in millions)(in millions)
Accounts Receivable - Reserve for Doubtful AccountsAccounts Receivable - Reserve for Doubtful AccountsJune 30,
2020
June 30,
2019
Accounts Receivable - Reserve for Doubtful AccountsMarch 31,
2021
March 31,
2020
Balance as of beginning of fiscal yearBalance as of beginning of fiscal year$4.6  $6.0  Balance as of beginning of fiscal year$4.3 $4.6 
Expense to increase the reserveExpense to increase the reserve0.2  0.2  Expense to increase the reserve0.2 0.1 
Write-off of uncollectible accountsWrite-off of uncollectible accounts(0.3) (1.0) Write-off of uncollectible accounts(0.3)(0.3)
Reclassification to held for sale—  (0.2) 
Balance as of period endBalance as of period end$4.5  $5.0  Balance as of period end$4.2 $4.4 
(in millions)(in millions)(in millions)
Contract AssetsContract AssetsContract Assets
Short-termShort-termJune 30,
2020
June 30,
2019
Short-termMarch 31,
2021
March 31,
2020
Balance as of beginning of fiscal yearBalance as of beginning of fiscal year$38.5  $51.2  Balance as of beginning of fiscal year$38.9 $38.5 
Recognized in current yearRecognized in current year37.5  45.1  Recognized in current year25.7 25.1 
Reclassified to accounts receivableReclassified to accounts receivable(34.5) (48.0) Reclassified to accounts receivable(19.1)(20.2)
ImpairmentImpairment—  —  Impairment
Reclassification to/from long-term0.1  —  
Reclassification to held for sale—  (7.4) 
Reclassification to/from contract liabilityReclassification to/from contract liability(3.5)
DivestitureDivestiture0.1 
Balance as of period endBalance as of period end$41.6  $40.9  Balance as of period end$42.0 $43.5 
Long-termLong-termJune 30,
2020
June 30,
2019
Long-termMarch 31,
2021
March 31,
2020
Balance as of beginning of fiscal yearBalance as of beginning of fiscal year$0.1  $0.1  Balance as of beginning of fiscal year$$0.1 
Recognized in current yearRecognized in current year—  —  Recognized in current year
Reclassified to accounts receivableReclassified to accounts receivable—  —  Reclassified to accounts receivable
ImpairmentImpairment—  —  Impairment
Reclassification to/from short-termReclassification to/from short-term(0.1) —  Reclassification to/from short-term(0.1)
Balance as of period endBalance as of period end$—  $0.1  Balance as of period end$0 $0 
(in millions)(in millions)(in millions)
Contract LiabilitiesContract LiabilitiesContract Liabilities
Short-termShort-termJune 30,
2020
June 30,
2019
Short-termMarch 31,
2021
March 31,
2020
Balance as of beginning of fiscal yearBalance as of beginning of fiscal year$78.7  $71.4  Balance as of beginning of fiscal year$111.8 $78.7 
Recognized in current yearRecognized in current year97.9  57.1  Recognized in current year57.1 71.7 
Amounts in beginning balance reclassified to revenueAmounts in beginning balance reclassified to revenue(33.9) (44.8) Amounts in beginning balance reclassified to revenue(43.0)(22.1)
Current year amounts reclassified to revenueCurrent year amounts reclassified to revenue(38.5) (14.4) Current year amounts reclassified to revenue(4.0)(17.1)
OtherOther(0.2) —  Other(0.3)
Reclassification to/from long-term5.8  —  
Reclassification to/from long-term and contract assetReclassification to/from long-term and contract asset(3.2)3.4 
Balance as of period endBalance as of period end$109.8  $69.3  Balance as of period end$118.7 $114.3 
Long-termLong-termJune 30,
2020
June 30,
2019
Long-termMarch 31,
2021
March 31,
2020
Balance as of beginning of fiscal yearBalance as of beginning of fiscal year$25.9  $7.3  Balance as of beginning of fiscal year$32.0 $25.9 
Recognized in current yearRecognized in current year12.4  0.5  Recognized in current year24.3 7.4 
Amounts in beginning balance reclassified to revenueAmounts in beginning balance reclassified to revenue(0.5) (0.5) Amounts in beginning balance reclassified to revenue(0.3)(0.2)
Current year amounts reclassified to revenueCurrent year amounts reclassified to revenue—  —  Current year amounts reclassified to revenue
OtherOther—  —  Other
Reclassification to/from short-termReclassification to/from short-term(5.8) —  Reclassification to/from short-term(0.3)(3.4)
Balance as of period endBalance as of period end$32.0  $7.3  Balance as of period end$55.7 $29.7 
98


Contract costs for obtaining and fulfilling a contract were $6.1$5.3 million and $6.5$5.4 million as of June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively, and are reported in other long-term assets on the consolidated balance sheet. Contract cost amortization expense for the three and six months ended June 30,March 31, 2021 and 2020 was $0.4$0.2 million and $0.7 million, respectively. Contract cost amortization expense for the three and six months ended June 30, 2019 was $0.3 million and $0.6 million, respectively.
Note 3. Inventories
Inventories at June 30, 2020March 31, 2021 and December 31, 20192020 were as follows (in millions):
June 30,
2020
December 31,
2019
March 31,
2021
December 31,
2020
Raw materials and suppliesRaw materials and supplies$202.2  $164.9  Raw materials and supplies$224.1 $207.6 
Work-in-processWork-in-process796.8  899.6  Work-in-process736.0 690.7 
Finished goodsFinished goods186.5  161.3  Finished goods164.0 181.6 
Total inventories at current costTotal inventories at current cost1,185.5  1,225.8  Total inventories at current cost1,124.1 1,079.9 
Adjustment from current cost to LIFO cost basisAdjustment from current cost to LIFO cost basis47.6  33.6  Adjustment from current cost to LIFO cost basis37.3 44.1 
Inventory valuation reservesInventory valuation reserves(129.6) (104.1) Inventory valuation reserves(113.6)(126.9)
Total inventories, netTotal inventories, net$1,103.5  $1,155.3  Total inventories, net$1,047.8 $997.1 
Inventories are stated at the lower of cost (last-in, first-out (LIFO), first-in, first-out (FIFO), and average cost methods) or market. Most of the Company’s inventory is valued utilizing the LIFO costing methodology. Inventory of the Company’s non-U.S. operations is valued using average cost or FIFO methods. Due to deflationary impacts primarily related to raw materials, the carrying value of the Company’s inventory as valued on LIFO exceeds current replacement cost, and based on a lower of cost or market value analysis, the Company maintains net realizable value (NRV) inventory valuation reserves to adjust carrying value of LIFO inventory to current replacement cost. These NRV reserves were $47.6$37.3 million at June 30, 2020March 31, 2021 and $33.6$44.1 million at December 31, 2019.2020. Impacts to cost of sales for changes in the LIFO costing methodology and associated NRV inventory reserves were as follows (in millions):
Six months ended June 30,
20202019
LIFO benefit$14.0  $5.8  
NRV charge(14.0) (5.9) 
Net cost of sales impact$—  $(0.1) 
Three months ended March 31,
20212020
LIFO benefit (charge)$(6.8)$12.0 
NRV benefit (charge)6.8 (12.0)
Net cost of sales impact$$
Note 4. Property, Plant and Equipment
Property, plant and equipment at June 30, 2020March 31, 2021 and December 31, 20192020 was as follows (in millions):
June 30,
2020
December 31,
2019
March 31,
2021
December 31,
2020
LandLand$34.9  $34.6  Land$34.8 $34.8 
BuildingsBuildings876.8  832.7  Buildings569.5 564.7 
Equipment and leasehold improvementsEquipment and leasehold improvements3,681.3  3,671.3  Equipment and leasehold improvements2,768.4 2,736.9 
4,593.0  4,538.6  3,372.7 3,336.4 
Accumulated depreciation and amortizationAccumulated depreciation and amortization(2,138.0) (2,088.5) Accumulated depreciation and amortization(1,894.0)(1,867.2)
Total property, plant and equipment, netTotal property, plant and equipment, net$2,455.0  $2,450.1  Total property, plant and equipment, net$1,478.7 $1,469.2 
The construction in progress portion of property, plant and equipment at June 30, 2020March 31, 2021 was $203.5$252.6 million.
Note 5. Goodwill Impairment

At June 30, 2020, Capital expenditures on the Company had $236.4consolidated statement of cash flows for the period ended March 31, 2021 exclude $9.2 million of goodwill on its consolidated balance sheet, all of which relates tocompletion payments that were included in property, plant and equipment and accrued at March 31, 2021.
the HPMC segment. Goodwill decreased $289.4 million at June 30, 2020 compared to December 31, 2019, due to a $287.0 million interim impairment charge in the HPMC segment and $2.4 million from the impact of foreign currency translation on goodwill denominated in functional currencies other than the U.S. dollar.

109


The Company performs its annual goodwill impairment evaluations in the fourth quarter of each year. During the second quarter of 2020, the Company performed an interim goodwill impairment analysis on the Forged Products reporting unit and its $460.4 million goodwill balance based on assessed potential indicators of impairment, including recent disruptions to the global commercial aerospace market resulting from the COVID-19 pandemic, and the increasing uncertainty of near-term demand requirements of aero-engine and airframe markets based on government responses to the pandemic and ongoing interactions with customers. In the previous 2019 annual goodwill impairment evaluation, this reporting unit had a fair value that exceeded carrying value by approximately 30%. For the 2020 interim impairment analysis, fair value was determined by a quantitative assessment that used a discounted cash flow technique, which represents Level 3 unobservable information in the fair value hierarchy. As a result of the second quarter 2020 interim goodwill impairment evaluation, the Company determined that the fair value of the Forged Products reporting unit was below carrying value, including goodwill, by $287.0 million. This was primarily due to changes in the timing and amount of expected cash flows resulting from lower projected revenues, profitability and cash flows due to near-term reductions in commercial aerospace market demand.Consequently, during the second quarter of 2020, the Company recorded a $287.0 million impairment charge for the partial impairment of the Forged Products reporting unit goodwill, most of which was assigned from the Company’s 2011 Ladish acquisition that was not deductible for income tax purposes. This goodwill impairment charge was excluded from 2020 HPMC business segment results. Accumulated goodwill impairment losses as of June 30, 2020 and December 31, 2019 were $528.0 million and $241.0 million, respectively.

The $236.4 million of goodwill remaining as of June 30, 2020 on the Company’s consolidated balance sheet is comprised of $173.4 million at Forged Products and $63.0 million at Specialty Materials. No indicators of impairment were observed in the second quarter 2020 associated with any other of the Company’s long-lived assets.
Note 6.5. Joint Ventures

The financial results of majority-owned joint ventures are consolidated into the Company’s operating results and financial position, with the minority ownership interest recognized in the consolidated statements of operations as net income attributable to noncontrolling interests, and as equity attributable to the noncontrolling interests within total stockholders’ equity. Investments in which the Company exercises significant influence, but which it does not control (generally a 20% to 50% ownership interest), are accounted for under the equity method of accounting.

Majority-Owned Joint Ventures

STAL:
The Company has a 60% interest in the Chinese joint venture known as STAL. The remaining 40% interest in STAL is owned by China Baowu Steel Group Corporation Limited, a state authorized investment company whose equity securities are publicly traded in the People’s Republic of China. STAL is part of ATI’s AA&S segment, and manufactures Precision Rolled Strip stainless products mainly for the electronics communication equipment, computer and automotive markets located in Asia. Cash and cash equivalents held by STAL as of June 30, 2020March 31, 2021 were $34.9$34.1 million.

Next Gen Alloys LLC:
The Company has a 51% interest in Next Gen Alloys LLC, a joint venture with GE Aviation for the development of a new meltless titanium alloy powder manufacturing technology. The titanium alloy powders are being developed for use in additive manufacturing applications, including 3D printing. Cash and cash equivalents held by this joint venture as of June 30, 2020March 31, 2021 were $4.2$2.5 million.

Equity Method Joint Ventures

A&T Stainless:
The Company has a 50% interest in A&T Stainless, a joint venture with an affiliate company of Tsingshan Group (Tsingshan) to produce 60-inch wide stainless sheet products for sale in North America. Tsingshan purchased its 50% joint venture interest in A&T Stainless in 2018 for $17.5 million, of which $12.0 million has been received by ATI. The A&T Stainless operations includeincluded the Company’s previously-idled direct roll and pickle (DRAP) facility in Midland, PA. ATI providesprovided hot-rolling conversion services to A&T Stainless using the AA&S segment’s Hot-Rolling and Processing Facility. ATI accounts for the A&T Stainless joint venture under the equity method of accounting.

In late March 2018, ATI filed for an exclusion from the Section 232 tariffs on behalf of A&T Stainless, which imports semi-finished stainless slab products from Indonesia. In April 2019, the Company learned that this exclusion request was denied by the U.S. Department of Commerce. ATI filed new requests on behalf of A&T Stainless for exclusion from the Section 232 tariffs in October 2019. These requests were denied by the U.S. Department of Commerce in the second quarter of 2020. A&T Stainless continues to be subject to2020, and the 25% tariff levied on its imports of semi-finished stainless slab products from Indonesia.
11


Results of A&T Stainless have been and will continue to be negatively impacted by these tariffs on imported stainless slab products.remains in place.

On March 31, 2020, ATI announced that A&T Stainless would be idlingDue to repeated tariff exclusion denials, the DRAP facility in 2020,was idled in an orderly shut down process. Operations at the DRAP facility will continue through earlyprocess that was completed in the third quarter of 2020. A&T Stainless recorded a $4.8 million charge in the second quarter 2020 for contractual termination benefits as a result of the idling decision. ATI’s share of A&T Stainless results were losses of $4.6$0.5 million and $8.5$3.9 million for the three and six months ended June 30,March 31, 2021 and 2020, respectively, and losses of $4.0 million and $7.3 million for the three and six months ended June 30, 2019, respectively, which is included within other income/expense, net, on the consolidated statements of operations. These equity method results are reportedoperations and in the AA&S segment, with the exception of ATI’s $2.4 million share of the charge for termination benefits.segment’s operating results.

During the fourth quarterAs of 2019, A&T Stainless recorded a $14.2 million impairment charge on its long-lived assets, of whichMarch 31, 2021 and December 31, 2020, ATI recognized a $7.1 million equity loss for its 50% share. In addition, ATI recorded a $4.3 million reserve during the fourth quarter of 2019 on itshad net receivables for working capital advances and administrative services from A&T Stainless. No additional impairment charge on the long-lived assets of A&T Stainless or additional reserve on ATI’s receivables from A&T Stainless, based on ATI’s share of the estimated fair value of the joint venture’s net assets, was considered necessary during the first six months of 2020.

As of June 30, 2020 and December 31, 2019, ATI had net receivables for working capital advances and administrative services, including the $4.3 million reserve, from A&T Stainless of $17.6$13.8 million and $32.5$14.0 million, respectively. For the June 30, 2020March 31, 2021 balance of net receivables, $2.0$0.7 million was reported in prepaid expenses and other current assets and $15.6$13.1 million in other long-term assets on the consolidated balance sheet, while for December 31, 2019, $8.32020, $0.5 million was reported in prepaid expenses and other current assets and $24.2$13.5 million in other long-term assets. In addition, ATI evaluated the collectability of its remaining $5.5 million receivable from Tsingshan, which is reported in other long-term assets on the consolidated balance sheet, and concluded that no impairment or loss in expected value exists at this time.

Uniti:
ATI has a 50% interest in the industrial titanium joint venture known as Uniti, with the remaining 50% interest held by VSMPO, a Russian producer of titanium, aluminum, and specialty steel products. Uniti is accounted for under the equity method of accounting. ATI’s share of Uniti’s income was $0.3$0.5 million and $0.5$0.2 million for the three and six months ended June 30,March 31, 2021 and 2020, respectively, and $0.5 million and $1.0 million for the three and six months ended June 30, 2019, respectively, which is included in the AA&S segment’s operating results, and within other income/expense, net on the consolidated statements of operations.
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Note 7.6. Supplemental Financial Statement Information
Other income (expense), net for the three and six months ended June 30,March 31, 2021 and 2020 and 2019 was as follows:
(in millions)Three months ended June 30,Six months ended June 30,
2020201920202019
Rent and royalty income$0.2  $0.7  $0.5  $1.4  
Gains from disposal of property, plant and equipment, net—  29.1  2.5  28.3  
Net equity loss on joint ventures (See Note 6)(1.9) (3.5) (5.6) (6.3) 
Joint venture restructuring charges (See Note 6)(2.4) —  (2.4) —  
Loss from sale of businesses—  (7.7) —  (7.7) 
Adjustment to indemnification for conditional ARO costs4.3  —  4.3  —  
Other0.3  —  0.3  —  
Total other income (expense), net$0.5  $18.6  $(0.4) $15.7  
(in millions)Three months ended March 31,
20212020
Rent and royalty income$0.3 $0.3 
Gains from disposal of property, plant and equipment, net1.2 2.5 
Net equity loss on joint ventures (See Note 5)(3.7)
Total other income (expense), net$1.5 $(0.9)
Gains from disposal of property, plant and equipment, net for the sixthree months ended June 30,March 31, 2020 includeincluded a $2.5 million gain on the sale of certain oil and gas rights. Gains from disposal of property, plant and equipment, net for the three and six months ended June 30, 2019 include a $29.3 millionThis cash gain on the sale of certain oil and gas rights. These cash gains arewas reported as an investing activitiesactivity on the consolidated statementsstatement of cash flows for the sixthree months ended June 30,March 31, 2020 and June 30, 2019, respectively, and areis excluded from segment operating results.
Reserves for restructuring charges at March 31, 2021 consist of severance costs incurred in the fourth quarter 2019 and throughout the 2020 fiscal year, the majority of which are expected to be paid by the end of 2021. Restructuring reserves activity is as follows:
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Severance and Employee
Benefit Costs
Balance at December 31, 2020$43.4 
Additions
Payments(6.5)
Balance at March 31, 2021$36.9 


InThe $36.9 million restructuring reserve balance at March 31, 2021 includes $28.4 million recorded in other current liabilities and $8.5 million recorded in other long-term liabilities on the second quarter of 2020, the Company finalized a settlement agreement for an indemnity claim concerning a conditional asset retirement obligation (ARO) with the buyer of a formerly-owned business and as a result, the Company reduced ARO reserves by $4.3 million.consolidated balance sheet.
Note 8.7. Debt
Debt at June 30, 2020March 31, 2021 and December 31, 20192020 was as follows (in millions): 
June 30,
2020
December 31,
2019
March 31,
2021
December 31,
2020
Allegheny Technologies 5.875% Notes due 2023 (a)Allegheny Technologies 5.875% Notes due 2023 (a)$500.0  $500.0  Allegheny Technologies 5.875% Notes due 2023 (a)$500.0 $500.0 
Allegheny Technologies 5.875% Notes due 2027Allegheny Technologies 5.875% Notes due 2027350.0  350.0  Allegheny Technologies 5.875% Notes due 2027350.0 350.0 
Allegheny Technologies 3.5% Convertible Senior Notes due 2025Allegheny Technologies 3.5% Convertible Senior Notes due 2025285.0  —  Allegheny Technologies 3.5% Convertible Senior Notes due 2025291.4 291.4 
Allegheny Technologies 4.75% Convertible Senior Notes due 2022Allegheny Technologies 4.75% Convertible Senior Notes due 202284.2  287.5  Allegheny Technologies 4.75% Convertible Senior Notes due 202284.2 84.2 
Allegheny Ludlum 6.95% Debentures due 2025(b)Allegheny Ludlum 6.95% Debentures due 2025(b)150.0  150.0  Allegheny Ludlum 6.95% Debentures due 2025(b)150.0 150.0 
Term Loan due 2024Term Loan due 2024200.0  100.0  Term Loan due 2024200.0 200.0 
U.S. revolving credit facilityU.S. revolving credit facility—  —  U.S. revolving credit facility
Foreign credit facilitiesForeign credit facilities5.6  4.9  Foreign credit facilities2.2 5.5 
Finance leases and otherFinance leases and other21.3  18.8  Finance leases and other51.4 48.0 
Debt issuance costsDebt issuance costs(16.1) (12.3) Debt issuance costs(15.1)(14.5)
Equity component of convertible debtEquity component of convertible debt(50.3) —  Equity component of convertible debt(46.8)
Total debtTotal debt1,529.7  1,398.9  Total debt1,614.1 1,567.8 
Short-term debt and current portion of long-term debtShort-term debt and current portion of long-term debt12.8  11.5  Short-term debt and current portion of long-term debt15.7 17.8 
Total long-term debtTotal long-term debt$1,516.9  $1,387.4  Total long-term debt$1,598.4 $1,550.0 
 
(a) Bearing interest at 7.875% effective February 15, 2016.
(b) The payment obligations of these debentures issued by Allegheny Ludlum, LLC are fully and unconditionally guaranteed
by ATI.
11


Revolving Credit Facility

The Company has an Asset Based Lending (ABL) Credit Facility, which is collateralized by the accounts receivable and inventory of the Company’s domestic operations. The ABL facility, which matures in September 2024, includes a $500 million revolving credit facility, a letter of credit sub-facility of up to $200 million, and as of June 30, 2020, a $200 million term loan (Term Loan). In June 2020, the Company exercised its right to borrow an additional $100 million under the term loan portion of the ABL, with the same September 2024 maturity date. The Term Loan has an interest rate of 2.0% plus a LIBOR spread and can be prepaid in increments of $25 million if certain minimum liquidity conditions are satisfied. In addition, the Company has the right to request an increase of up to $200 million in the maximum amount available under the revolving credit facility for the duration of the ABL. The Company has a $50 million floating-for-fixed interest rate swap which converts a portion of the Term Loan to a 4.21% fixed interest rate. The swap matures in June 2024.

The applicable interest rate for revolving credit borrowings under the ABL facility includes interest rate spreads based on available borrowing capacity that range between 1.25% and 1.75% for LIBOR-based borrowings and between 0.25% and 0.75% for base rate borrowings. The ABL facility contains a financial covenant whereby the Company must maintain a fixed charge coverage ratio of not less than 1.00:1.00 after an event of default has occurred and is continuing or if the undrawn availability under the ABL revolving credit portion of the facility is less than the greater of (i) $87.5 million, calculated as 12.5% of the then applicable maximum advance amount under the revolving credit portion of the ABL and the outstanding Term Loan balance, or (ii) $62.5 million. The Company was in compliance with thedoes not meet this required fixed charge coverage ratio covenant at June 30, 2020.March 31, 2021. As a result, the Company is unable to access this remaining 12.5%, or $87.5 million, of the ABL facility until it meets the required ratio. Additionally, the Company must demonstrate minimum liquidity, as calculated in accordance with the terms of the ABL facility, during the 90-day period immediately preceding the stated maturity date of the 4.75% Convertible Notes due 2022 and the 5.875% Notes due 2023. The ABL also contains customary affirmative and negative covenants for credit facilities of this type, including limitations on the Company’s ability to incur additional indebtedness or liens or to enter into investments, mergers and acquisitions, dispositions of assets and transactions with affiliates, some of which are more restrictive at any time during the term of the ABL when the Company’s fixed charge coverage ratio is less than 1.00:1.00 and its undrawn availability under the revolving portion of the ABL is less than the greater of (a) $150 million or (b) 30% of the sum of the maximum advance amount under the revolving credit portion of the ABL and the outstanding Term Loan balance.

As of June 30, 2020,March 31, 2021, there were 0 outstanding borrowings under the revolving portion of the ABL facility, and $35.2$42.8 million was utilized to support the issuance of letters of credit. There were 0 average revolving credit borrowings under the ABL facility for the first quarter of 2021. There were average revolving credit borrowings of $58$53 million bearing an average annual interest rate of 2.2%2.6% under the ABL facility for the first six monthsquarter of 2020. There were 0 average revolving credit borrowings for the first six months of 2019.

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2025 Convertible Notes

In JuneDuring 2020, the Company issued and sold $285.0 million aggregate principal amount of 3.5% Convertible Senior Notes due 2025 (the 2025 Convertible Notes). The Company granted the underwriters a 13-day option to purchase up to an additional $40.0$291.4 million aggregate principal amount of 2025 Convertible Notes on the same terms and conditions to cover over-allotments, if any.Notes. The underwriters exercised a portion of this option on June 30, 2020, and the Company completed the offering and sale of an additional $6.4 million aggregate principal amount of 2025 Convertible Notes on July 2, 2020, subsequent to the end of the second quarter 2020. Interest on the 2025 Convertible Notes at thehave a 3.5% cash coupon rate that is payable semi-annually in arrears on each June 15 and December 15, commencing December 15, 2020.

The Company used a portion15. Including amortization of deferred issuance costs, the net proceeds fromeffective interest rate is 4.2% for the offering of the 2025 Convertible Notes to repurchase $203.2first quarter ended March 31, 2021. Remaining deferred issuance costs were $7.8 million aggregate principal amount of its outstanding 4.75% Convertible Senior Notes due 2022 (the 2022 Convertible Notes), resulting in a $21.5 million debt extinguishment charge, which included a $19.1 million cash make-whole payment related to the early extinguishment of the 2022 Convertible Notes as required by the applicable indenture, and a $2.4 million charge for deferred debt issue costs. The Company also used $19.0 million of the net proceeds of the offering of the 2025 Convertible Notes to pay the cost of capped call transactions, described below, which was recorded as a reduction to additional paid-in-capital in stockholders’ equity on the consolidated balance sheet. The remainder of the net proceeds from the offering will be used for general corporate purposes.

at March 31, 2021. The Company does not have the right to redeem the 2025 Convertible Notes prior to June 15, 2023. On or after June 15, 2023 and prior to the 41st scheduled trading day immediately preceding the maturity date, the Company may redeem all or any portion of the 2025 Convertible Notes, at its option, at a redemption price equal to 100% of the principal amount thereof, plus any accrued and unpaid interest if the last reported sale price of ATI’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on the trading day immediately preceding the date on which ATI provides written notice of redemption.

The initial conversion rate for the 2025 Convertible Notes is 64.5745 shares of ATI common stock per $1,000 principal amount of the 2025 Convertible Notes, equivalent to an initial conversion price of approximately $15.49 per share.share (18.8 million shares). Prior to the close of business on the business day immediately preceding March 15, 2025, the 2025 Convertible Notes will be convertible at the option of the holders of 2025 Convertible Notes only upon the satisfaction of specified conditions and during certain periods. Thereafter, until the close of business on the second scheduled trading day immediately preceding the maturity date, the 2025 Convertible Notes will be convertible at the option of holders of 2025 Convertible Notes at any time regardless of these conditions. Conversions of the 2025 Convertible Notes may be settled in cash, shares of ATI’s common stock or a combination thereof, at ATI’s election.

As a result of this flexible settlement feature of the 2025 Convertible Notes, the embedded conversion option iswas required to be separately accounted for as a component of stockholders’ equity. The value of the embedded conversion option was determined to be $50.3$51.4 million based on the estimated fair value of comparable senior unsecured debt without the conversion feature, using an income approach of expected present value. TheDuring the 2020 fiscal year, the equity component will bewas amortized as additional non-cash interest expense, commonly referred to as phantom yield, over the term of the 2025 Convertible Notes
12


using the effective interest method, and is not remeasured as long as it continues to meet the conditions for equity classification. Offering costs attributable to the debt component totaling $7.3 million are being amortized to interest expense over the term of the 2025 Convertible Notes, and offering costs attributable to the equity component totaling $1.6 million were netted within stockholders’ equity.method. As a result, $48.7as of December 31, 2020, $49.8 million of the 2025 Convertible Notes was recorded in additional paid-in-capital in stockholders’ equity ($50.351.4 million of the gross $285.0$291.4 million, net of $1.6 million of allocated offering costs). IncludingDue to the non-cash phantom yield and including debt issue cost amortization, the 2025 Convertible Notes will havehad reported interest expense in 2020 at an 8.4% rate, higher than the 3.5% cash coupon rate. Effective January 1, 2021, ATI early-adopted new accounting guidance as discussed in Note 1 that eliminated the equity component classification of the embedded conversion option, as well as the phantom yield portion of interest expense on a prospective basis. Upon adoption on January 1, 2021, long-term debt increased by $45.4 million, representing the $46.8 million equity component of convertible debt as of December 31, 2020 in the above table, net of reclassified debt issue costs.

Holders of the 2025 Convertible Notes may require ATI to repurchase their 2025 Convertible Notes upon the occurrence of certain events that constitute a fundamental change under the indenture governing the 2025 Convertible Notes at a purchase price equal to 100% of the principal amount thereof, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date. In connection with certain corporate events or if ATI issues a notice of redemption, it will, under certain circumstances, increase the conversion rate for holders who elect to convert their 2025 Convertible Notes in connection with such corporate event or during the relevant redemption period.

In connection with the pricing of the 2025 Convertible Notes, ATI entered into privately negotiated capped call transactions with certain of the initial purchasers of the 2025 Convertible Notes or their respective affiliates (collectively, the Counterparties). The capped call transactions are expected generally to reduce potential dilution to ATI’s common stock upon any conversion of the 2025 Convertible Notes and/or offset any cash payments ATI is required to make in excess of the principal amount of converted 2025 Convertible
14


Notes, as the case may be, with such reduction and/or offset subject to a cap based on the cap price. The cap price of the capped call transactions initially is approximately $19.76 per share, and is subject to adjustments under the terms of the capped call transactions. ATI entered into additional capped call transactions with
2022 Convertible Notes

As of March 31, 2021, the Counterparties related to the additional $6.4Company had $84.2 million of aggregate principal amount of the 20252022 Convertible Notes issuedoutstanding, which mature on July 2, 2020, subsequent1, 2022. Interest on the 2022 Convertible Notes at 4.75% cash coupon rate is payable semi-annually in arrears on each January 1 and July 1. Including amortization of deferred issuance costs, the effective interest rate is 5.4%. Remaining deferred issuance costs were $0.6 million at March 31, 2021.

The Company does not have the right to redeem the 2022 Convertible Notes prior to their stated maturity date. Holders of the 2022 Convertible Notes have the option to convert their notes into shares of the Company’s common stock, at any time prior to the endclose of business on the business day immediately preceding the stated maturity date (July 1, 2022). The initial conversion rate for the remaining $84.2 million of 2022 Convertible Notes is 69.2042 shares of ATI common stock per $1,000 (in whole dollars) principal amount of Notes (5.8 million shares), equivalent to conversion price of $14.45 per share, subject to adjustment in certain events. Other than receiving cash in lieu of fractional shares, holders do not have the option to receive cash instead of shares of common stock upon conversion. Accrued and unpaid interest that exists upon conversion of a note will be deemed paid by the delivery of shares of ATI common stock and no cash payment or additional shares will be given to the holders.

If the Company undergoes a fundamental change as defined in the agreement, holders of the second quarter 2020.2022 Convertible Notes may require the Company to repurchase the notes in whole or in part for cash at a price equal to 100% of the principal amount of the notes to be purchased plus any accrued and unpaid interest to, but excluding, the repurchase date.
Note 9.8. Derivative Financial Instruments and Hedging
As part of its risk management strategy, the Company, from time-to-time, utilizes derivative financial instruments to manage its exposure to changes in raw material prices, energy costs, foreign currencies, and interest rates. In accordance with applicable accounting standards, the Company accounts for most of these contracts as hedges.
The Company sometimes uses futures and swap contracts to manage exposure to changes in prices for forecasted purchases of raw materials, such as nickel, and natural gas. Under these contracts, which are generally accounted for as cash flow hedges, the price of the item being hedged is fixed at the time that the contract is entered into, and the Company is obligated to make or receive a payment equal to the net change between this fixed price and the market price at the date the contract matures.
The majority of ATI’s products are sold utilizing raw material surcharges and index mechanisms. However, as of June 30, 2020,March 31, 2021, the Company had entered into financial hedging arrangements, primarily at the request of its customers, related to firm orders, for an aggregate notional amount of approximately 56 million pounds of nickel with hedge dates through 2023. The aggregate notional amount hedged is less thanapproximately 10% of a single year’s estimated nickel raw material purchase requirements.
At June 30, 2020,March 31, 2021, the outstanding financial derivatives used to hedge the Company’s exposure to energy cost volatility included natural gas cost hedges. At June 30, 2020,March 31, 2021, the Company hedged approximately 100%75% of the Company’s forecasted domestic requirements for natural gas for the remainder of 20202021 and approximately 60%25% for 2021.2022.

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While the majority of the Company’s direct export sales are transacted in U.S. dollars, foreign currency exchange contracts are used, from time-to-time, to limit transactional exposure to changes in currency exchange rates for those transactions denominated in a non-U.S. currency. The Company sometimes purchases foreign currency forward contracts that permit it to sell specified amounts of foreign currencies expected to be received from its export sales for pre-established U.S. dollar amounts at specified dates. The forward contracts are denominated in the same foreign currencies in which export sales are denominated. These contracts are designated as hedges of the variability in cash flows of a portion of the forecasted future export sales transactions which otherwise would expose the Company to foreign currency risk, primarily euro. In addition, the Company may also hedge forecasted capital expenditures and designate cash balances held in foreign currencies as hedges of forecasted foreign currency transactions. At June 30, 2020,March 31, 2021, the Company had 0 significant outstanding foreign currency forward contracts.
The Company may enter into derivative interest rate contracts to maintain a reasonable balance between fixed- and floating-rate debt. The Company has a $50 million floating-for-fixed interest rate swap which converts a portion of the Term Loan to a 4.21% fixed rate. The swap matures in June 2024. The Company designated the interest rate swap as a cash flow hedge of the Company’s exposure to the variability of the payment of interest on a portion of its Term Loan borrowings. The ineffectiveness at hedge inception, determined from the fair value of the swap immediately prior to its July 2019 amendment, will bewas amortized to interest expense over the initial Term Loan swap maturity date of January 12, 2021.
There are no credit risk-related contingent features in the Company’s derivative contracts, and the contracts contained no provisions under which the Company has posted, or would be required to post, collateral. The counterparties to the Company’s derivative contracts are substantial and creditworthy commercial banks that are recognized market makers. The Company controls its credit exposure by diversifying across multiple counterparties and by monitoring credit ratings and credit default swap spreads of its counterparties. The Company also enters into master netting agreements with counterparties when possible.

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The fair values of the Company’s derivative financial instruments are presented below, representing the gross amounts recognized which are not offset by counterparty or by type of item hedged. All fair values for these derivatives were measured using Level 2 information as defined by the accounting standard hierarchy, which includes quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs derived principally from or corroborated by observable market data.
(In millions)
Asset derivatives
(In millions)
Asset derivatives
Balance sheet locationJune 30,
2020
December 31,
2019
(In millions)
Asset derivatives
Balance sheet locationMarch 31,
2021
December 31,
2020
Derivatives designated as hedging instruments:Derivatives designated as hedging instruments:Derivatives designated as hedging instruments:
Foreign exchange contractsForeign exchange contractsPrepaid expenses and other current assets$0.1 $
Nickel and other raw material contractsNickel and other raw material contractsPrepaid expenses and other current assets1.2  4.4  Nickel and other raw material contractsPrepaid expenses and other current assets2.1 3.7 
Natural gas contractsNatural gas contractsPrepaid expenses and other current assets0.1  —  Natural gas contractsPrepaid expenses and other current assets0.5 0.2 
Nickel and other raw material contractsNickel and other raw material contractsOther assets0.2  1.2  Nickel and other raw material contractsOther assets0.4 0.7 
Natural gas contractsNatural gas contractsOther assets0.1 0.2 
Total derivatives designated as hedging instrumentsTotal derivatives designated as hedging instruments1.5  5.6  Total derivatives designated as hedging instruments$3.2 $4.8 
Total asset derivatives$1.5  $5.6  
Liability derivativesLiability derivativesBalance sheet location  Liability derivativesBalance sheet location  
Derivatives designated as hedging instruments:Derivatives designated as hedging instruments:Derivatives designated as hedging instruments:
Interest rate swapInterest rate swapOther current liabilities$1.1  $0.3  Interest rate swapOther current liabilities$1.0 $1.0 
Natural gas contractsNatural gas contractsOther current liabilities2.5  2.5  Natural gas contractsOther current liabilities0.1 0.3 
Nickel and other raw material contractsNickel and other raw material contractsOther current liabilities0.8  2.5  Nickel and other raw material contractsOther current liabilities0.9 0.1 
Interest rate swapInterest rate swapOther long-term liabilities3.1  1.2  Interest rate swapOther long-term liabilities1.7 2.5 
Natural gas contractsNatural gas contractsOther long-term liabilities0.2  1.0  Natural gas contractsOther long-term liabilities0.1 
Nickel and other raw material contractsOther long-term liabilities0.3  —  
Total derivatives designated as hedging instrumentsTotal derivatives designated as hedging instruments8.0  7.5  Total derivatives designated as hedging instruments$3.7 $4.0 
Total liability derivatives$8.0  $7.5  
For derivative financial instruments that are designated as cash flow hedges, the gain or loss on the derivative is reported as a component of other comprehensive income (OCI) and reclassified into earnings in the same period or periods during which the hedged item affects earnings. For derivative financial instruments that are designated as fair value hedges, changes in the fair value of these derivatives are recognized in current period results and are reported as changes within accrued liabilities and other on the consolidated statements of cash flows. There were no outstanding fair value hedges as of June 30, 2020.March 31, 2021. The Company did not use net investment hedges for the periods presented. The effects of derivative instruments in the tables below are presented net of related income taxes, excluding any impacts of changes to income tax valuation allowances affecting results of operations or other comprehensive income, when applicable (see Note 1614 for further explanation).
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Assuming market prices remain constant with those at June 30, 2020,March 31, 2021, a pre-tax lossgain of $3.1$0.7 million is expected to be recognized over the next 12 months.
Activity with regard to derivatives designated as cash flow hedges for the three and six month periods ended June 30,March 31, 2021 and 2020 and 2019 was as follows (in millions): 
Amount of Gain (Loss)
Recognized in OCI on
Derivatives
Amount of Gain (Loss)
Reclassified from
Accumulated OCI
into Income (a)
Three months ended June 30,Three months ended June 30,
Derivatives in Cash Flow Hedging Relationships2020201920202019
Nickel and other raw material contracts$2.0  $(1.9) $(1.8) $(0.2) 
Natural gas contracts(0.1) (1.9) (1.0) (0.1) 
Foreign exchange contracts—  (0.2) (0.1) —  
Interest rate swap(0.3) (0.3) (0.3) (0.1) 
Total$1.6  $(4.3) $(3.2) $(0.4) 
16


Amount of Gain (Loss)
Recognized in OCI on
Derivatives
Amount of Gain (Loss)
Reclassified from
Accumulated OCI
into Income (a)
Amount of Gain (Loss)
Recognized in OCI on
Derivatives
Amount of Gain (Loss)
Reclassified from
Accumulated OCI
into Income (a)
Six months ended June 30,Six months ended June 30,Three months ended March 31,Three months ended March 31,
Derivatives in Cash Flow Hedging RelationshipsDerivatives in Cash Flow Hedging Relationships2020201920202019Derivatives in Cash Flow Hedging Relationships2021202020212020
Nickel and other raw material contractsNickel and other raw material contracts$(4.2) $6.4  $(2.0) $(0.6) Nickel and other raw material contracts$(0.6)$(6.2)$1.5 $(0.2)
Natural gas contractsNatural gas contracts(1.3) (2.3) (2.0) —  Natural gas contracts0.4 (1.2)(1.0)
Foreign exchange contractsForeign exchange contracts(0.1) 0.1  (0.1) (0.3) Foreign exchange contracts0.1 (0.1)
Interest rate swapInterest rate swap(2.2) (0.5) (0.5) (0.2) Interest rate swap0.4 (1.9)(0.2)(0.2)
TotalTotal$(7.8) $3.7  $(4.6) $(1.1) Total$0.3 $(9.4)$1.3 $(1.4)
(a)The gains (losses) reclassified from accumulated OCI into income related to the derivatives, with the exception of the interest rate swap, are presented in cost of sales in the same period or periods in which the hedged item affects earnings. The gains (losses) reclassified from accumulated OCI into income on the interest rate swap are presented in interest expense in the same period as the interest expense on the Term Loan is recognized in earnings.
The disclosures of gains or losses presented above for nickel and other raw material contracts and foreign currency contracts do not take into account the anticipated underlying transactions. Since these derivative contracts represent hedges, the net effect of any gain or loss on results of operations may be fully or partially offset.
Note 10.9. Fair Value of Financial Instruments
The estimated fair value of financial instruments at June 30, 2020March 31, 2021 was as follows: 
 Fair Value Measurements at Reporting Date Using  Fair Value Measurements at Reporting Date Using
(In millions)(In millions)Total
Carrying
Amount
Total
Estimated
Fair Value
Quoted Prices in
Active Markets for
Identical Assets (Level 1)
Significant
Observable
Inputs
(Level 2)
(In millions)Total
Carrying
Amount
Total
Estimated
Fair Value
Quoted Prices in
Active Markets for
Identical Assets (Level 1)
Significant
Observable
Inputs
(Level 2)
Cash and cash equivalentsCash and cash equivalents$539.1  $539.1  $539.1  $—  Cash and cash equivalents$541.7 $541.7 $541.7 $
Derivative financial instruments:Derivative financial instruments:Derivative financial instruments:
AssetsAssets1.5  1.5  —  1.5  Assets3.2 3.2 3.2 
LiabilitiesLiabilities8.0  8.0  —  8.0  Liabilities3.7 3.7 3.7 
Debt (a)Debt (a)1,596.1  1,563.8  1,336.9  226.9  Debt (a)1,629.2 1,938.4 1,684.8 253.6 

The estimated fair value of financial instruments at December 31, 20192020 was as follows: 
 Fair Value Measurements at Reporting Date Using  Fair Value Measurements at Reporting Date Using
(In millions)(In millions)Total
Carrying
Amount
Total
Estimated
Fair Value
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant
Observable
Inputs
(Level 2)
(In millions)Total
Carrying
Amount
Total
Estimated
Fair Value
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Cash and cash equivalentsCash and cash equivalents$490.8  $490.8  $490.8  $—  Cash and cash equivalents$645.9 $645.9 $645.9 $
Derivative financial instruments:Derivative financial instruments:Derivative financial instruments:
AssetsAssets5.6  5.6  —  5.6  Assets4.8 4.8 4.8 
LiabilitiesLiabilities7.5  7.5  —  7.5  Liabilities4.0 4.0 4.0 
Debt (a)Debt (a)1,411.2  1,676.5  1,552.8  123.7  Debt (a)1,629.1 1,847.7 1,594.2 253.5 
(a)The total carrying amount for debt for both periods excludes debt issuance costs related to the recognized debt liability which is presented in the consolidated balance sheet as a direct reduction from the carrying amount of the debt liability. The June 30,December 31, 2020 debt carrying value includes $50.3$46.8 million recorded in stockholders’ equity for athe unamortized balance of the portion of the 2025 Convertible Notes recorded in stockholders’ equity due to the flexible settlement feature of the notesnotes. Effective January 1, 2021, ATI early-adopted new accounting guidance that eliminated the equity component classification of the embedded conversion option of the 2025 Convertible Notes (see Note 8)1).

1715


In accordance with accounting standards, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Accounting standards established three levels of a fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The availability of observable market data is monitored to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. In such instances, the transfer is reported at the beginning of the reporting period.

The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments:
Cash and cash equivalents: Fair value was determined using Level 1 information.
Derivative financial instruments: Fair values for derivatives were measured using exchange-traded prices for the hedged items. The fair value was determined using Level 2 information, including consideration of counterparty risk and the Company’s credit risk.
Short-term and long-term debt: The fair values of the Company’s publicly traded debt were based on Level 1 information. The fair values of the other short-term and long-term debt were determined using Level 2 information.
Note 11.10. Retirement Benefits
The Company has defined contribution retirement plans or defined benefit pension plans covering substantially all employees. Company contributions to defined contribution retirement plans are generally based on a percentage of eligible pay or based on hours worked. Benefits under the defined benefit pension plans are generally based on years of service and/or final average pay. The Company funds the U.S. pension plans in accordance with the Employee Retirement Income Security Act of 1974, as amended, and the Internal Revenue Code of 1986, as amended (IRC). The Company also sponsors several postretirement plans covering certain collectively-bargained salaried and hourly employees. The plans provide health care and life insurance benefits for eligible retirees. In most retiree health care plans, Company contributions towards premiums are capped based on the cost as of a certain date, thereby creating a defined contribution. All defined benefit pension and retiree health care plans are closed to new entrants.
For the three month periods ended June 30,March 31, 2021 and 2020, and 2019, the components of pension and other postretirement benefit expense for the Company’s defined benefit plans included the following (in millions): 
Pension BenefitsOther Postretirement BenefitsPension BenefitsOther Postretirement Benefits
Three months ended June 30,Three months ended June 30,Three months ended March 31,Three months ended March 31,
2020201920202019 2021202020212020
Service cost - benefits earned during the yearService cost - benefits earned during the year$3.1  $3.1  $0.6  $0.4  Service cost - benefits earned during the year$3.8 $3.2 $0.3 $0.5 
Interest cost on benefits earned in prior yearsInterest cost on benefits earned in prior years21.6  26.4  2.7  3.7  Interest cost on benefits earned in prior years17.1 21.5 2.1 2.7 
Expected return on plan assetsExpected return on plan assets(33.6) (32.9) —  —  Expected return on plan assets(34.1)(33.6)
Amortization of prior service cost (credit)Amortization of prior service cost (credit)0.2  0.1  (1.0) (0.7) Amortization of prior service cost (credit)0.2 0.2 (0.7)(0.9)
Amortization of net actuarial lossAmortization of net actuarial loss18.6  18.4  2.7  3.4  Amortization of net actuarial loss18.9 18.6 3.3 2.7 
Total retirement benefit expenseTotal retirement benefit expense$9.9  $15.1  $5.0  $6.8  Total retirement benefit expense$5.9 $9.9 $5.0 $5.0 


1816


For the six month periods ended June 30, 2020 and 2019, the components of pension and other postretirement benefit expense for the Company’s defined benefit plans included the following (in millions):
Pension BenefitsOther Postretirement Benefits
Six months ended June 30,Six months ended June 30,
 2020201920202019
Service cost - benefits earned during the year$6.3  $6.3  $1.1  $0.9  
Interest cost on benefits earned in prior years43.1  52.7  5.4  7.4  
Expected return on plan assets(67.2) (65.7) —  —  
Amortization of prior service cost (credit)0.4  0.2  (1.9) (1.4) 
Amortization of net actuarial loss37.2  36.8  5.4  6.7  
Total retirement benefit expense$19.8  $30.3  $10.0  $13.6  
Note 12.11. Income Taxes

The provision for income taxes for the secondfirst quarter and six months ended June 30, 2020March 31, 2021 was $92.6 million, or (28.3)%, and $103.4 million, or (35.3)%, respectively, of loss before taxes.$5.5 million. In the second quarter 2020, ATI recorded a $99.0 million deferred tax asset valuation allowance on its U.S. federal and state tax attributes. Thethe Company entered into a three-year cumulative loss within the United States, as of June 30, 2020, limiting the Company’s ability to utilize future projections when analyzing the need for a valuation allowance, therefore limiting sources of income as part of the analysis. TheATI continues to maintain valuation allowances on its’ U.S. federal and state deferred tax assets, as well as for certain foreign jurisdictions. Throughout 2020, the Company calculated the provision for income taxes based upon actual year to date results due to the uncertainty of future projections as a result of the global pandemic. For 2021, the Company continues to be unable to make a reliable estimate of the annual effective tax rate, as significant changes in projected results for the Company’s domesticU.S. operations could produce a significant variation in its annual effective tax rate. As a result, the Company recorded income tax for the quarter ended March 31, 2021 based upon an annual effective tax rate for its foreign, non-valuation allowance operations, combined with actual year-to-date tax expense related to its U.S. jurisdictions. The current year tax expense is mainly attributable to the Company’s foreign operations. The tax provision for the secondfirst quarter 2019 and the six months2020 ended June 30, 2019March 31, 2020 was $5.8$10.8 million, or 6.9%31.4%, and $6.6 million, or 6.5%, respectively, of income before taxes, duebased on the actual year to deferred tax asset valuation allowances in the United States.date effective rate for this period.

The Company has analyzed the impacts of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) that was enacted on March 27, 2020 and has determined that the impact does not result in a material income tax expense or benefit. The Company continues to evaluate the overall changes between the deferred tax asset classifications of interest, pension and net operating losses resulting from the CARES Act.
Note 13.12. Business Segments
Effective January 1, 2020, theThe Company began operating underoperates in 2 revised business segments: High Performance Materials & Components (HPMC) and Advanced Alloys & Solutions (AA&S). HPMC is now comprised ofIn the Specialty Materials and Forged Products businesses, as well as our ATI Europe distribution operations. The updated HPMCfourth quarter 2020, the Company changed its segment intensifies its primary focusperformance measure from segment operating profit to segment EBITDA, based on maximizing aero-engine materials and components growth, with more than 80% of its revenue derived frominternal reporting changes. Prior period results are presented using the aerospace and defense markets. The new AA&S segment combines our Specialty Alloys & Components (SAC) business, including the primary titanium operations in Richland, WA and Albany, OR, with ATI’s former Flat Rolled Products (FRP) business segment, which included the FRP business, the 60%-owned STAL joint venture, and the Uniti and A&T Stainless 50%-owned joint ventures that are reported in AA&S segment results under the equity method of accounting. AA&S is focused on delivering high-value flat products primarily to the energy, aerospace, and defense end-markets, which comprise over 50% of its revenue. AA&S was created to align melting technologies with hot-rolling capabilities to produce products with faster flow times and lower costs. Financial results of our aerospace-grade titanium plate products also transferred from HPMC to AA&S effective January 1, 2020. All segment reporting information for 2020 and prior periods below reflect these two revised business segments.

19


performance measure. The measure of segment operating profit, which is used to analyze the performance and results of the business segments,EBITDA excludes all effects of LIFO inventory accounting and any related changes in net realizable value inventory reserves which offset the Company’s aggregate net debit LIFO valuation balance, income taxes, depreciation and amortization, corporate expenses, net interest expense, closed operations and other expenses,income (expense), charges for goodwill impairment (see Note 5),and asset impairments, restructuring and other charges, (see Note 14), debt extinguishment charges and non-operating gains andor losses. Management believes segment operating profit,EBITDA, as defined, provides an appropriate measure of controllable operating results at the business segment level. Following is certain financial information with respect to the Company’s business segments for the periods indicated (in millions):
Three months ended June 30,Six months ended June 30,Three months ended March 31,
2020201920202019 20212020
Total sales:Total sales:Total sales:
High Performance Materials & ComponentsHigh Performance Materials & Components$316.7  $552.8  $765.2  $1,069.1  High Performance Materials & Components$265.2 $448.5 
Advanced Alloys & SolutionsAdvanced Alloys & Solutions506.2  612.8  1,093.8  1,185.0  Advanced Alloys & Solutions476.0 587.6 
822.9  1,165.6  1,859.0  2,254.1  741.2 1,036.1 
Intersegment sales:Intersegment sales:Intersegment sales:
High Performance Materials & ComponentsHigh Performance Materials & Components16.0  19.7  44.2  39.4  High Performance Materials & Components24.3 28.2 
Advanced Alloys & SolutionsAdvanced Alloys & Solutions36.6  65.5  89.0  129.5  Advanced Alloys & Solutions24.4 52.4 
52.6  85.2  133.2  168.9  48.7 80.6 
Sales to external customers:Sales to external customers:Sales to external customers:
High Performance Materials & ComponentsHigh Performance Materials & Components300.7  533.1  721.0  1,029.7  High Performance Materials & Components240.9 420.3 
Advanced Alloys & SolutionsAdvanced Alloys & Solutions469.6  547.3  1,004.8  1,055.5  Advanced Alloys & Solutions451.6 535.2 
$770.3  $1,080.4  $1,725.8  $2,085.2  $692.5 $955.5 
Three months ended June 30,Six months ended June 30,
 2020201920202019
Segment operating profit:
High Performance Materials & Components$9.2  $78.4  $66.3  $130.1  
Advanced Alloys & Solutions18.1  36.1  42.2  46.1  
Total segment operating profit27.3  114.5  108.5  176.2  
LIFO and net realizable value reserves—  —  —  (0.1) 
Corporate expenses(7.7) (18.0) (20.5) (34.6) 
Closed operations and other income (expense)2.4  (7.9) (4.2) (11.0) 
Restructuring and other charges (See Note 14)(16.7) —  (24.7) —  
Impairment of goodwill (See Note 5)(287.0) —  (287.0) —  
Joint venture restructuring charges (See Note 6)(2.4) —  (2.4) —  
Gain on asset sales, net—  21.6  2.5  21.6  
Debt extinguishment charge (See Note 8)(21.5) —  (21.5) —  
Interest expense, net(21.7) (25.9) (43.6) (50.7) 
(Loss) income before income taxes$(327.3) $84.3  $(292.9) $101.4  
17


Three months ended March 31,
 20212020
EBITDA:
High Performance Materials & Components$24.6 $76.6 
Advanced Alloys & Solutions49.7 41.1 
Total segment EBITDA74.3 117.7 
LIFO and net realizable value reserves
Corporate expenses(12.2)(12.3)
Closed operations and other income (expense)0.5 (6.3)
Total ATI Adjusted EBITDA62.6 99.1 
Depreciation & amortization (a)(36.1)(37.3)
Interest expense, net(23.4)(21.9)
Restructuring and other charges(8.0)
Gain on asset sales2.5 
Income before income taxes$3.1 $34.4 

Corporate expenses were lower for the second quarter and first six months of 2020 compared to 2019 primarily due to lower incentive compensation expense based on expected performance versus targeted metrics, and lower expenses resulting from cost reduction actions. (a) The following is depreciation & amortization by each business segment:
Three months ended March 31,
20212020
High Performance Materials & Components$19.6 $19.5 
Advanced Alloys & Solutions15.5 17.0 
Other1.0 0.8 
36.1 37.3 

Closed operations and other expenses were lowerincome in the secondfirst quarter and first six months of 20202021 compared to 2019, asexpense in the secondfirst quarter of 2020 benefited by $4.3 million from settlements of contract indemnity obligations, along with foreign currency gains andreflects lower legal, environmental, andcosts at closed facilities, including retirement benefit expense, insurance and legal costs, and real estate and other facility costs, and changes in foreign currency remeasurement impacts primarily related to ATI’s European Treasury operation.

Restructuring and other charges for the first quarter of closed operations, compared to2020 are comprised of severance obligations for the prior year period.reduction of approximately 90 positions for a voluntary retirement incentive program for eligible salaried employees.

The $2.5 million gain on asset sales net for the six months ended June 30,first quarter 2020 consists of a gain on the sale of certain oil and gas rights (see Note 7)6). The $21.6 million gain on asset sales, net for the three and six months ended June 30, 2019 consists of a $29.3 million gain on the sale of certain oil and gas rights, partially offset by a $7.7 million loss on the sale of two non-core forging facilities, located in Portland, IN and Lebanon, KY.

The Company’s collective bargaining agreement (CBA) with the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied & Industrial Service Workers International Union, AFL-CIO, CLC (USW) involving approximately 1,100 active full-time represented employees located primarily within the AA&S segment operations, as well as a number of inactive employees, expired on February 28, 2021. USW-represented employees continued to work under the terms of the expired CBA until March 30, 2021 when they engaged in a strike, which remains ongoing. ATI continues to negotiate in good faith with the USW in an attempt to reach a new labor agreement.

2018


Note 14. Restructuring

For the second quarter and six months ended June 30, 2020, the Company recorded restructuring charges of $16.7 million and $24.7 million, respectively, which are presented as restructuring charges in the consolidated statements of operations. These charges were a result of workforce right-sizing actions to better match the Company’s cost structure to expected demand, primarily as a result of economic challenges created by the COVID-19 pandemic. For the second quarter of 2020, these charges are comprised of severance obligations for the elimination of approximately 550 positions for both involuntary reductions and voluntary retirement incentive programs related to both salary and hourly employees in the HPMC segment. For the six months ended June 30, 2020, these charges also include severance obligations for the reduction of approximately 90 positions for a voluntary retirement incentive program completed in the first quarter of 2020 for eligible salaried employees, building on the previously announced restructuring program in the fourth quarter of 2019.

Reserves for restructuring charges at June 30, 2020 consist of severance costs incurred in the fourth quarter 2019 and the first half of 2020, which are expected to be substantially paid by mid-2021. Restructuring reserves activity is as follows:

Severance and Employee
Benefit Costs
Balance at December 31, 2019$4.5 
Additions24.7 
Payments(2.8)
Balance at June 30, 2020$26.4 

Of this $26.4 million restructuring reserve balance at June 30, 2020, $25.6 million is recorded in other current liabilities and $0.8 million is recorded in other long-term liabilities on the consolidated balance sheet.
Note 15.13. Per Share Information
The following table sets forth the computation of basic and diluted income (loss) per common share: 
Three months endedSix months ended Three months ended
(In millions, except per share amounts)(In millions, except per share amounts)June 30,June 30,(In millions, except per share amounts)March 31,
2020201920202019(In millions, except per share amounts)20212020
Numerator:Numerator:Numerator:
Numerator for basic (loss) income per common share –
Net (loss) income attributable to ATI$(422.6) $75.1  $(401.5) $90.1  
Numerator for basic income (loss) per common share –Numerator for basic income (loss) per common share –
Net income (loss) attributable to ATINet income (loss) attributable to ATI$(7.9)$21.1 
Effect of dilutive securities:Effect of dilutive securities:Effect of dilutive securities:
4.75% Convertible Senior Notes due 20224.75% Convertible Senior Notes due 2022—  3.2  —  6.5  4.75% Convertible Senior Notes due 20222.3 
3.5% Convertible Senior Notes due 20253.5% Convertible Senior Notes due 2025—  —  —  —  3.5% Convertible Senior Notes due 2025
Numerator for diluted (loss) income per common share –
Net (loss) income attributable to ATI after assumed conversions$(422.6) $78.3  $(401.5) $96.6  
Numerator for diluted income (loss) per common share –Numerator for diluted income (loss) per common share –
Net income (loss) attributable to ATI after assumed conversionsNet income (loss) attributable to ATI after assumed conversions$(7.9)$23.4 
Denominator:Denominator:Denominator:
Denominator for basic net (loss) income per common share – weighted average shares126.6  125.9  126.4  125.7  
Denominator for basic net income (loss) per common share – weighted average sharesDenominator for basic net income (loss) per common share – weighted average shares126.8 126.1 
Effect of dilutive securities:Effect of dilutive securities:Effect of dilutive securities:
Share-based compensationShare-based compensation—  0.6  —  0.6  Share-based compensation0.4 
4.75% Convertible Senior Notes due 20224.75% Convertible Senior Notes due 2022—  19.9  —  19.9  4.75% Convertible Senior Notes due 202219.9 
3.5% Convertible Senior Notes due 20253.5% Convertible Senior Notes due 2025—  —  —  —  3.5% Convertible Senior Notes due 2025
Denominator for diluted net (loss) income per common share – adjusted weighted average shares and assumed conversions126.6  146.4  126.4  146.2  
Basic net (loss) income attributable to ATI per common share$(3.34) $0.60  $(3.18) $0.72  
Diluted net (loss) income attributable to ATI per common share$(3.34) $0.54  $(3.18) $0.66  
Denominator for diluted net income (loss) per common share – adjusted weighted average shares and assumed conversionsDenominator for diluted net income (loss) per common share – adjusted weighted average shares and assumed conversions126.8 146.4 
Basic net income (loss) attributable to ATI per common shareBasic net income (loss) attributable to ATI per common share$(0.06)$0.17 
Diluted net income (loss) attributable to ATI per common shareDiluted net income (loss) attributable to ATI per common share$(0.06)$0.16 
Common stock that would be issuable upon the assumed conversion of the 2022 Convertible Notes and the 2025 Convertible Notes and other option equivalents and contingently issuable shares are excluded from the computation of contingently issuable shares, and therefore, from the denominator for diluted earnings per share, if the effect of inclusion is anti-dilutive. There were
21


20.5 million and 20.4 25.7 million anti-dilutive shares for the three and six month periodsmonths ended June 30, 2020, respectively.March 31, 2021. There were 0 anti-dilutive shares for the three and six months periods ended June 30, 2019.March 31, 2020.


19


Note 16.14. Accumulated Other Comprehensive Income (Loss)
The changes in accumulated other comprehensive income (loss) (AOCI)AOCI by component, net of tax, for the three month period ended June 30, 2020March 31, 2021 were as follows (in millions):
Post-
retirement
benefit plans
Currency
translation
adjustment
DerivativesDeferred Tax Asset Valuation AllowanceTotal
Attributable to ATI:
Balance, March 31, 2020$(1,067.4) $(99.2) $(8.5) $(41.5) $(1,216.6) 
OCI before reclassifications —   14.7   1.6  —  16.3  
Amounts reclassified from AOCI(a)15.6  (b)—  (c)3.2  (d)8.7  27.5  
Net current-period OCI 15.6   14.7   4.8  8.7  43.8  
Balance, June 30, 2020$(1,051.8) $(84.5) $(3.7) $(32.8) $(1,172.8) 
Attributable to noncontrolling interests:
Balance, March 31, 2020$—  $9.0  $—  $—  $9.0  
OCI before reclassifications —   (0.5)  —  —  (0.5) 
Amounts reclassified from AOCI —  (b)—   —  ��  —  
Net current-period OCI —   (0.5)  —  —  (0.5) 
Balance, June 30, 2020$—  $8.5  $—  $—  $8.5  
The changes in accumulated other comprehensive income (loss) (AOCI) by component, net of tax, for the six month period ended June 30, 2020 were as follows (in millions):
Post-
retirement
benefit plans
Currency
translation
adjustment
DerivativesDeferred Tax Asset Valuation AllowanceTotalPost-
retirement
benefit plans
Currency
translation
adjustment
DerivativesDeferred Tax Asset Valuation AllowanceTotal
Attributable to ATI:Attributable to ATI:Attributable to ATI:
Balance, December 31, 2019$(1,083.1) $(76.6) $(0.5) $(41.5) $(1,201.7) 
Balance, December 31, 2020Balance, December 31, 2020$(1,119.9)$(55.5)$2.1 $(50.3)$(1,223.6)
OCI before reclassificationsOCI before reclassifications —   (7.9)  (7.8) —  (15.7) OCI before reclassifications  (5.4) 0.3 (5.1)
Amounts reclassified from AOCIAmounts reclassified from AOCI(a)31.3  (b)—  (c)4.6  (d)8.7  44.6  Amounts reclassified from AOCI(a)16.5 (b)(c)(1.3)(d)4.9 20.1 
Net current-period OCINet current-period OCI 31.3   (7.9)  (3.2) 8.7  28.9  Net current-period OCI 16.5  (5.4) (1.0)4.9 15.0 
Balance, June 30, 2020$(1,051.8) $(84.5) $(3.7) $(32.8) $(1,172.8) 
Balance, March 31, 2021Balance, March 31, 2021$(1,103.4)$(60.9)$1.1 $(45.4)$(1,208.6)
Attributable to noncontrolling interests:Attributable to noncontrolling interests:Attributable to noncontrolling interests:
Balance, December 31, 2019$—  $9.8  $—  $—  $9.8  
Balance, December 31, 2020Balance, December 31, 2020$$21.2 $$$21.2 
OCI before reclassificationsOCI before reclassifications —   (1.3)  —  —  (1.3) OCI before reclassifications  0.6  0.6 
Amounts reclassified from AOCIAmounts reclassified from AOCI —  (b)—   —  —  —  Amounts reclassified from AOCI (b) 
Net current-period OCINet current-period OCI —   (1.3)  —  —  (1.3) Net current-period OCI  0.6  0.6 
Balance, June 30, 2020$—  $8.5  $—  $—  $8.5  
Balance, March 31, 2021Balance, March 31, 2021$$21.8 $$$21.8 

(a)Amounts were included in net periodic benefit cost for pension and other postretirement benefit plans (see Note 11)10).
(b)No amounts were reclassified to earnings.
(c)Amounts related to derivatives are included in cost of goods sold or interest expense in the period or periods the hedged item affects earnings (see Note 9)8).
(d)Represents the net change in deferred tax asset valuation allowances on changes in AOCI balances between the balance sheet dates.
22


The changes in AOCI by component, net of tax, for the three month period ended June 30, 2019March 31, 2020 were as follows (in millions):
Post-
retirement
benefit plans
Currency
translation
adjustment
DerivativesDeferred Tax Asset Valuation AllowanceTotal
Attributable to ATI:
Balance, March 31, 2019$(989.7) $(68.1) $3.9  $(41.6) $(1,095.5) 
OCI before reclassifications —   (4.9)  (4.3) —  (9.2) 
Amounts reclassified from AOCI(a)16.3  (b)—  (c)0.4  (d)3.6  20.3  
Net current-period OCI 16.3   (4.9)  (3.9) 3.6  11.1  
Balance, June 30, 2019$(973.4) $(73.0) $—  $(38.0) $(1,084.4) 
Attributable to noncontrolling interests:
Balance, March 31, 2019$—  $16.3  $—  $—  $16.3  
OCI before reclassifications —   (3.6)  —  —  (3.6) 
Amounts reclassified from AOCI —  (b)—   —  —  —  
Net current-period OCI —   (3.6)  —  —  $(3.6) 
Balance, June 30, 2019$—  $12.7  $—  $—  $12.7  
The changes in AOCI by component, net of tax, for the six month period ended June 30, 2019 were as follows (in millions):
Post-
retirement
benefit plans
Currency
translation
adjustment
DerivativesDeferred Tax Asset Valuation AllowanceTotalPost-
retirement
benefit plans
Currency
translation
adjustment
DerivativesDeferred Tax Asset Valuation AllowanceTotal
Attributable to ATI:Attributable to ATI:Attributable to ATI:
Balance, December 31, 2018$(1,005.8) $(73.9) $(4.8) $(49.3) $(1,133.8) 
Balance, December 31, 2019Balance, December 31, 2019$(1,083.1)$(76.6)$(0.5)$(41.5)$(1,201.7)
OCI before reclassificationsOCI before reclassifications —   0.9   3.7  —  4.6  OCI before reclassifications  (22.6) (9.4)(32.0)
Amounts reclassified from AOCIAmounts reclassified from AOCI(a)32.4  (b)—  (c)1.1  (d)11.3  44.8  Amounts reclassified from AOCI(a)15.7 (b)(c)1.4 17.1 
Net current-period OCINet current-period OCI 32.4   0.9   4.8  11.3  49.4  Net current-period OCI 15.7  (22.6) (8.0)(14.9)
Balance, June 30, 2019$(973.4) $(73.0) $—  $(38.0) $(1,084.4) 
Balance, March 31, 2020Balance, March 31, 2020$(1,067.4)$(99.2)$(8.5)$(41.5)$(1,216.6)
Attributable to noncontrolling interests:Attributable to noncontrolling interests:Attributable to noncontrolling interests:
Balance, December 31, 2018$—  $11.1  $—  $—  $11.1  
Balance, December 31, 2019Balance, December 31, 2019$$9.8 $$$9.8 
OCI before reclassificationsOCI before reclassifications —   1.6   —  —  1.6  OCI before reclassifications  (0.8) (0.8)
Amounts reclassified from AOCIAmounts reclassified from AOCI —  (b)—   —  —  —  Amounts reclassified from AOCI (b) 
Net current-period OCINet current-period OCI —   1.6   —  —  $1.6  Net current-period OCI  (0.8) $(0.8)
Balance, June 30, 2019$—  $12.7  $—  $—  $12.7  
Balance, March 31, 2020Balance, March 31, 2020$$9.0 $$$9.0 

(a)Amounts were included in net periodic benefit cost for pension and other postretirement benefit plans (see Note 11)10).
(b)No amounts were reclassified to earnings.
(c)Amounts related to derivatives are included in cost of goods sold or interest expense in the period or periods the hedged item affects earnings (see Note 9)8).
(d)Represents the net change in deferred tax asset valuation allowances on changes in AOCI balances between the balance sheet dates.
Other comprehensive income (loss) amounts (OCI) reported above by category are net of applicable income tax expense (benefit) for each year presented. Income tax expense (benefit) on OCI items is recorded as a change in a deferred tax asset or liability. Amounts recognized in OCI include the impact of any deferred tax asset valuation allowances, when applicable.
20


Foreign currency translation adjustments, including those pertaining to noncontrolling interests, are generally not adjusted for income taxes as they relate to indefinite investments in non-U.S. subsidiaries.



23


Reclassifications out of AOCI for the three and six month periods ended June 30,March 31, 2021 and 2020 and 2019 were as follows: 
Amount reclassified from AOCI Amounts reclassified to AOCI
Details about AOCI Components
(In millions)
Details about AOCI Components
(In millions)
Three months ended June 30, 2020Three months ended June 30, 2019Six months ended June 30, 2020Six months ended June 30, 2019Affected line item in the
statements of operations
Details about AOCI Components
(In millions)
Three months ended March 31, 2021Three months ended March 31, 2020Affected line item in the
statements of operations
Postretirement benefit plansPostretirement benefit plansPostretirement benefit plans
Prior service creditPrior service credit$0.8  $0.6  $1.5  $1.2  (a) Prior service credit$0.5 $0.7 (a) 
Actuarial lossesActuarial losses(21.3) (21.8) (42.6) (43.5) (a) Actuarial losses(22.2)(21.3)(a) 
(20.5) (21.2) (41.1) (42.3) (c) Total before tax(21.7)(20.6)(c) Total before tax
(4.9) (4.9) (9.8) (9.9) Tax benefit (d)(5.2)(4.9)Tax benefit (d)
$(15.6) $(16.3) $(31.3) $(32.4) Net of tax$(16.5)$(15.7)Net of tax
DerivativesDerivativesDerivatives
Nickel and other raw material contractsNickel and other raw material contracts$(2.3) $(0.3) $(2.6) $(0.8) (b) Nickel and other raw material contracts$2.0 $(0.3)(b) 
Natural gas contractsNatural gas contracts(1.3) (0.1) (2.6) —  (b) Natural gas contracts(1.3)(b) 
Foreign exchange contractsForeign exchange contracts(0.1) —  (0.1) (0.4) (b) Foreign exchange contracts(b) 
Interest rate swapInterest rate swap(0.5) (0.1) (0.7) (0.2) (b)Interest rate swap(0.3)(0.2)(b)
(4.2) (0.5) (6.0) (1.4) (c) Total before tax1.7 (1.8)(c) Total before tax
(1.0) (0.1) (1.4) (0.3) Tax benefit (d)0.4 (0.4)Tax expense (benefit) (d)
$(3.2) $(0.4) $(4.6) $(1.1) Net of tax$1.3 $(1.4)Net of tax

(a)Amounts are reported in nonoperating retirement benefit expense (see Note 11)10).
(b)Amounts related to derivatives, with the exception of the interest rate swap, are included in cost of goods sold in the period or periods the hedged item affects earnings. Amounts related to the interest rate swap are included in interest expense in the same period as the interest expense on the Term Loan is recognized in earnings (see Note 8).
(c)For pretax items, positive amounts are income and negative amounts are expense in terms of the impact to net income. Tax effects are presented in conformity with ATI’s presentation in the consolidated statements of operations.
(d)These amounts exclude the impact of any deferred tax asset valuation allowances, when applicable.
Note 17.15. Commitments and Contingencies
The Company is subject to various domestic and international environmental laws and regulations that govern the discharge of pollutants and disposal of wastes, and which may require that it investigate and remediate the effects of the release or disposal of materials at sites associated with past and present operations. The Company could incur substantial cleanup costs, fines, and civil or criminal sanctions, third party property damage or personal injury claims as a result of violations or liabilities under these laws or noncompliance with environmental permits required at its facilities. The Company is currently involved in the investigation and remediation of a number of its current and former sites, as well as third party sites.
Environmental liabilities are recorded when the Company’s liability is probable and the costs are reasonably estimable. In many cases, however, the Company is not able to determine whether it is liable or, if liability is probable, to reasonably estimate the loss or range of loss. Estimates of the Company’s liability remain subject to additional uncertainties, including the nature and extent of site contamination, available remediation alternatives, the extent of corrective actions that may be required, and the number, participation, and financial condition of other potentially responsible parties (PRPs). The Company adjusts its accruals to reflect new information as appropriate. Future adjustments could have a material adverse effect on the Company’s consolidated results of operations in a given period, but the Company cannot reliably predict the amounts of such future adjustments.

21


At June 30, 2020,March 31, 2021, the Company’s reserves for environmental remediation obligations totaled approximately $15$13 million, of which $5$4 million was included in other current liabilities. The reserve includes estimated probable future costs of $3 million for federal Superfund and comparable state-managed sites; $10$8 million for formerly owned or operated sites for which the Company has remediation or indemnification obligations; $1 million for owned or controlled sites at which Company operations have been discontinued; and $1 million for sites utilized by the Company in its ongoing operations. The timing of expenditures depends on a number of factors that vary by site. The Company expects that it will expend present accruals over
24


many years and that remediation of all sites with which it has been identified will be completed within thirty years. The Company continues to evaluate whether it may be able to recover a portion of past and future costs for environmental liabilities from third parties and to pursue such recoveries where appropriate.
Based on currently available information, it is reasonably possible that costs for recorded matters may exceed the Company’s recorded reserves by as much as $16$15 million. Future investigation or remediation activities may result in the discovery of additional hazardous materials, potentially higher levels of contamination than discovered during prior investigation, and may impact costs of the success or lack thereof in remedial solutions. Therefore, future developments, administrative actions or liabilities relating to environmental matters could have a material adverse effect on the Company’s consolidated financial condition or results of operations.
A number of other lawsuits, claims and proceedings have been or may be asserted against the Company relating to the conduct of its currently and formerly owned businesses, including those pertaining to product liability, environmental, health and safety matters and occupational disease (including as each relates to alleged asbestos exposure), as well as patent infringement, commercial, government contracting, construction, employment, employee and retiree benefits, taxes, environmental, and stockholder and corporate governance matters. While the outcome of litigation cannot be predicted with certainty, and some of these lawsuits, claims or proceedings may be determined adversely to the Company, management does not believe that the disposition of any such pending matters is likely to have a material adverse effect on the Company’s financial condition or liquidity, although the resolution in any reporting period of one or more of these matters could have a material adverse effect on the Company’s consolidated results of operations for that period.
Allegheny Technologies Incorporated and its subsidiary, ATI Titanium LLC (“ATI Titanium”), are parties to a lawsuit captioned US Magnesium, LLC v. ATI Titanium LLC (Case No. 2:17-cv-00923-DB) and filed in federal district court in Salt Lake City, UT, pertaining to a Supply and Operating Agreement between US Magnesium LLC (“USM”) and ATI Titanium entered into in 2006 (the “Supply Agreement”). In 2016, ATI Titanium notified USM that it would suspend performance under the Supply Agreement in reliance on certain terms and conditions included in the Supply Agreement. USM subsequently filed a claim challenging ATI Titanium’s right to suspend performance under the Supply Agreement, claiming that such suspension was a material breach of the Supply Agreement and seeking monetary damages, and ATI Titanium filed a counterclaim for breach of contract against USM. In 2018, USM obtained leave of the court to add Allegheny Technologies Incorporated as a separate party defendant, and ATI Titanium filed a motion to dismiss the claim against Allegheny Technologies Incorporated, which the court denied on April 19, 2019. The case is proceeding through discovery, and whileNo trial date has been set by the court given the restrictions of the pandemic. While ATI intends to vigorously defend against and pursue these claims, it cannot predict their outcomes at this time.
22



Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
ATI is a global manufacturer of technically advanced specialty materials and complex components. Our largest markets are aerospace & defense, representing approximately 50%40% of total sales, led by products for jet engines. Additionally, we have a strong presence in the energy markets, including oil & gas, hydrocarbon and chemicaldownstream processing, and electricalspecialty energy. In aggregate, these markets represent about 70%60% of our revenue. ATI is a market leader in manufacturing differentiated products that require our materials science capabilities and unique process technologies, including our new product development competence. Our capabilities range from cast/wrought and powder alloy development to final production of highly engineered finished components, including those used forin next-generation jet engine forgingsengines and 3D-printed aerospace products.

Effective January 1,In the fourth quarter 2020, we beganthe Company changed its segment performance measure from segment operating under two revised business segments: High Performance Materials & Components (HPMC) and Advanced Alloys & Solutions (AA&S). HPMCprofit to segment EBITDA, based on internal reporting changes. Prior period results are presented using the new performance measure. The measure of segment EBITDA is now compriseddefined further below. Management believes segment EBITDA, as defined, provides an appropriate measure of controllable operating results at the Specialty Materials and Forged Products businesses, as well as the ATI Europe distribution operations. The new AA&S segment combines the Specialty Alloys & Components (SAC) business, including our primary titanium operations in Richland, WA and Albany, OR, with ATI’s former Flat Rolled Products (FRP) business segment which included the FRP business, the 60%-owned Shanghai STAL Precision Stainless Steel Company Limited (STAL), and the Uniti LLC (Uniti) and Allegheny & Tsingshan Stainless (A&T Stainless) 50%-owned joint ventures that are reported in AA&S segment results under the equity method of accounting. Financial results of aerospace-grade titanium plate products also transferred from HPMC to AA&S effective January 1, 2020. All segment reporting information for 2020 and prior periods presented below reflect these two revised business segments.level.

ATI reported secondfirst quarter 20202021 sales of $770.3$692.5 million and a lossincome before tax of $327.3$3.1 million, compared to sales of $1.1 billion$955.5 million and income before tax of $84.3$34.4 million for the secondfirst quarter of 2019. Results in 2019 included $40 million of sales and minimal segment operating profit related to the divested titanium investment castings and industrial forgings businesses.2020. Our gross profit for the secondfirst quarter of 20202021 was $74.7$85.8 million, or 9.7%12.4% of sales, a $103.0$49.0 million decrease, and a 670170 basis
25


point decrease, compared to the secondfirst quarter 2019,2020, largely due to weakened market conditions resulting from the COVID-19 pandemic.

Second quarter 2020 results included $327.6 million of pretax charges, all of which are excluded from segment results and consisted of the following:
$287.0 million for impairment of a portion of goodwill at our Forged Products operations,
$21.5 million for debt extinguishment on $203.2 million, or 71%, of the principal balance of the outstanding 4.75% Convertible Senior Notes due 2022 (the 2022 Convertible Notes),
$16.7 million of restructuring charges for severance for hourly and salary employees, and
$2.4 million of severance charges at our A&T Stainless joint venture.

The goodwill impairment and restructuring charges are included in operating Operating income (loss) on the consolidated statements of operations, which was an operating loss of $273.4$31.8 million for the secondfirst quarter 2020,2021, compared to operating income of $110.0$68.4 million for the secondfirst quarter 2019.2020. First quarter 2020 results include an $8.0 million restructuring charge for a voluntary retirement incentive program for eligible salaried employees.

Nonoperating items included a reduction$6.8 million in nonoperating retirement benefit expense of approximately $7in the first quarter 2021, compared to $11.2 million in the second quarter 2020, compared to the prior year period. SecondFirst quarter 20192020 other (nonoperating) incomeincome/expense included $21.6 million in gains from non-core asset sales, consisting of a $29.3$2.5 million gain to monetizeresulting from the sale of certain oil and gas rights, partially offset byrights. First quarter 2021 results include $5.5 million of income tax expense, primarily for foreign operations, as ATI continues to maintain a $7.7 million loss on the sale of our industrial forgings business. In the second quarter 2020, we recorded a $99.0 million deferred tax asset valuation allowance on ourits U.S. federal and statedeferred tax attributes, due to a three-year cumulative loss position.assets. Net loss attributable to ATI was $422.6$7.9 million, or ($3.34)0.06) per share, in the secondfirst quarter of 2020,2021, compared to net income attributable to ATI of $75.1$21.1 million, or $0.54$0.16 per share, for the secondfirst quarter of 2019.2020. Adjusted EBITDA was $57.6$62.6 million, or 7.5%9.0% of sales, for the secondfirst quarter 2020,2021, and $149.1$99.1 million, or 13.8%10.4% of sales, for the prior year first quarter. See the Financial Condition and Liquidity section of Management’s Discussion and Analysis for these non-GAAP definitions and calculations.

SecondWhile first quarter 2021 results began to benefit from the ongoing modest recovery in jet engine production, they still reflect thecontinued weakened market conditions resulting from the COVID-19 pandemic. We maintainedcontinued our solid balance sheet and cash and liquidity positions during the second quarter 2020, and issued $285 million aggregate principal amount of new, five-year convertible debt in June 2020 to partially retire our 2022 Convertible Notes while lowering cash interest costs and reducing future stockholder dilution. We also repaid the $300 million of revolving credit facility borrowings that were outstanding at the end of first quarter 2020,of 2021 to support our ability to meet customer obligations and exercised our option to draw another $100 million term loan within our asset based lending credit facility. These actions are further discussedsucceed in the Financial Condition and Liquidity section of Management’s Discussion and Analysis.

As discussed above, at the start of 2020, ATI realigned its business segments to streamline operations and unlock synergies, and proactively implemented workforce reduction initiatives in the fourth quarter 2019 and again in both the first and second quarters of 2020 to better match our cost structure to expected demand. To date, we have implemented plans to reduce company-wide employment levels by approximately 800 people, or about 10% of our total workforce.this economic environment. To help further mitigate the financial impact from these market conditions, including reduced aerospace and consumer demand levels stemming from the COVID-19 pandemic, ATI proactively implemented workforce reduction initiatives in 2020. These actions helped to better align our cost structure to expected demand. Additionally, we also implemented additional cost reductionbegan strategic transformation efforts within the AA&S segment to eliminate production of standard stainless sheet products in 2021. Since the second quarter 2020 including the temporary idlingbeginning of operations2021, we have signed significant long-term customer agreements that are expected to reduce costsincrease AA&S revenues and inventory, salary reductions to a substantial portion of our staff, reductions in 401(k) benefits for nearly all employees, furlough of non-essential positions,improve segment profitability and significant reductions in capital expenditures and corporate expenses. Overall, ATI expects $140 million to $160 million of 2020 cost reductions.cash flow. These actions provide a strong foundation to respondin response to the economic challenges created by the COVID-19 pandemic. We will continue

ATI’s collective bargaining agreement (CBA) with the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied & Industrial Service Workers International Union, AFL-CIO, CLC (USW) involving approximately 1,100 active full-time represented employees located primarily within the AA&S segment operations, as well as a number of inactive employees, expired on February 28, 2021. USW-represented employees continued to evaluate our demand levelswork under the terms of the expired CBA until March 30, 2021 when they engaged in a strike, which remains ongoing. This labor action did not have a significant impact on the first quarter 2021 results, and operating ratesATI continues to work to minimize the operational disruption and may take additional actionsfinancial impact from the strike as warranted.the negotiation process to reach a new labor agreement continues.

Compared to the secondfirst quarter 2019,2020, sales decreased 44%43% in the HPMC business segment and decreased 14%16% in the AA&S business segment. In HPMC, first quarter 2021 sales declined by 5% as a result of the titanium investment castings and industrial forgings businesses divested in 2019. Sales to the aerospace & defense markets which represented 84% of second quarter 2020 HPMC sales, were 43%50% lower, primarily resulting from a 50%62% decrease in sales to the commercial aerospace market,market. This decline was partially offset by an increase in the government aerospace & defense markets. Divested businesses accounted for 4% of the HPMC aerospace & defense sales decline.market sales. Compared to the prior year period, lower AA&S sales were largely due to 20% declinesa 19% decline in both the energy market sales and commercial aerospace markets, as well lowera 51% decline in sales to the automotivecommercial aerospace market.

Results for the first six months of 2020 were sales of $1.73 billion and loss before tax of $292.9 million, compared to sales of $2.09 billion and income before tax of $101.4 million for the first six months of 2019. Our gross profit was $209.5 million,
2623


or 12.1% ofIn aggregate, ATI’s aerospace & defense markets sales a $99.3decreased 48% to $254.2 million declinein the first quarter 2021, compared to the first six months of 2019, reflecting COVID-19 impacts. The 2020 results include the $327.6 million of charges recorded in the second quarter 2020 discussed above as well as an $8.0 million restructuring charge recorded in the first quarter of 2020, which is excluded from segment results, for severance obligations for a voluntary retirement incentive program for eligible salaried employees.

Nonoperating items included a reduction in nonoperating retirement benefit expense of approximately $14 million for the first half 2020, compared to the prior year period. Other (nonoperating) income for the first half 2019 included the second quarter 2019 gains on non-core asset sales discussed above. Results for the six months 2020 include the $99.0 million deferred tax asset valuation allowance on our U.S. federal and state tax attributes recorded in the second quarter 2020. Net loss attributable to ATI was $401.5 million, or ($3.18) per share, in the first six months of 2020, compared to net income attributable to ATI of $90.1 million, or $0.66 per share, for the first six months of 2019.
Compared to the first six months of 2019, sales decreased 30% in the HPMC business segment and 5% in the AA&S business segment. Sales to the aerospace & defense markets in the HPMC segment were 28% lower than the first six months of 2019, due to declines in the commercial aerospace market. AA&S sales reflect lower sales in both the energy and automotive markets.

ATI’s sales to the aerospace & defense markets decreased 36%, to $365.6 million in the second quarter 2020, compared to the second quarter 2019, with a 4% decline from divestitures. HPMC sales of next-generation jet engine products, which represented 41% of total secondfirst quarter 20202021 HPMC jet engine product sales, decreased 64%63% compared to the secondfirst quarter 2019 with 4% of this decline from divestitures.2020.

Comparative information for our overall revenuesrevenues (in millions) by end market including divested businesses prior to sale, and their respective percentages of total revenues for the three and six month periods ended June 30,March 31, 2021 and 2020 and 2019 were as follows:
 Three months endedThree months ended
MarketsJune 30, 2020June 30, 2019
Aerospace & Defense$365.6  47 %$572.2  53 %
Energy*167.5  22 %213.4  20 %
Automotive50.8  %73.6  %
Food Equipment & Appliances47.2  %49.6  %
Electronics/Computers/Communication39.5  %38.1  %
Construction/Mining34.8  %52.6  %
Medical29.9  %42.4  %
Other35.0  %38.5  %
Total$770.3  100 %$1,080.4  100 %
 Six months endedSix months ended
MarketsJune 30, 2020June 30, 2019
Aerospace & Defense$858.1  50 %$1,097.8  53 %
Energy*338.1  20 %381.9  18 %
Automotive127.3  %150.5  %
Food Equipment & Appliances97.6  %102.8  %
Construction/Mining78.4  %110.5  %
Electronics/Computers/Communication72.7  %72.2  %
Medical68.5  %88.5  %
Other85.1  %81.0  %
Total$1,725.8  100 %$2,085.2  100 %
*Includes the oil & gas, hydrocarbon and chemical processing, and electrical energy markets.
 Three months endedThree months ended
MarketsMarch 31, 2021March 31, 2020
Aerospace & Defense:
     Jet Engines- Commercial$106.1 15 %$272.2 29 %
     Airframes- Commercial58.2 %134.9 14 %
     Defense89.9 13 %85.4 %
     Total Aerospace & Defense$254.2 37 %$492.5 52 %
Energy:
     Oil & Gas82.5 12 %118.1 12 %
     Specialty Energy66.6 10 %52.5 %
     Total Energy149.1 22 %170.6 18 %
Automotive91.5 13 %76.5 %
Electronics55.6 %33.2 %
Construction/Mining42.5 %43.6 %
Food Equipment & Appliances35.4 %50.4 %
Medical29.0 %38.6 %
Other35.2 %50.1 %
Total$692.5 100 %$955.5 100 %
For the secondfirst quarter 2020,2021, international sales of $293 million, or 38%42% of total sales, decreased compared to $440from $349 million, or 41%37% of total sales, in the secondfirst quarter 2019.2020. ATI’s international sales are mostly to the aerospace, energy, electronics, automotive and medical markets.

27


Sales of our high-value products represented 83% and 84%88% of total sales, the majority of which were consumed byto our aerospace & defense customers, for the three and six months ended June 30, 2020, respectively.March 31, 2021. Comparative information for our major high-value and standard products including divested business prior to sale, based on their percentages of revenues isare shown below. In conjunction with the announced ongoing exit of standard stainless products, ATI reclassified certain items in the AA&S segment as follows:High-Value Products. Prior period information reflects these reclassifications. Hot-Rolling and Processing Facility (HRPF) conversion service sales in the AA&S segment are excluded from this presentation. We expect to cease production of standard stainless products by the end of fiscal year 2021.
Three months ended June 30,Six months ended June 30,Three months ended March 31,
2020201920202019 20212020
High-Value ProductsHigh-Value ProductsHigh-Value Products
Nickel-based alloys and specialty alloysNickel-based alloys and specialty alloys30 %33 %31 %32 %Nickel-based alloys and specialty alloys31 %35 %
Precision rolled strip productsPrecision rolled strip products20 %12 %
Precision forgings, castings and components
Precision forgings, castings and components
15 %16 %
Titanium and titanium-based alloys
Titanium and titanium-based alloys
19 %18 %18 %18 %Titanium and titanium-based alloys
12 %18 %
Precision forgings, castings and components
14 %19 %15 %19 %
Precision rolled strip products12 %10 %12 %11 %
Zirconium and related alloysZirconium and related alloys%%%%Zirconium and related alloys10 %%
Total High-Value ProductsTotal High-Value Products83 %86 %84 %86 %Total High-Value Products88 %88 %
Standard ProductsStandard ProductsStandard Products
Standard stainless productsStandard stainless products17 %14 %16 %14 %Standard stainless products12 %12 %
Grand TotalGrand Total100 %100 %100 %100 %Grand Total100 %100 %


24


Segment operating profitEBITDA for the secondfirst quarter 20202021 was $27.3$74.3 million, or 3.5%10.7% of sales, compared to segment operating profitEBITDA of $114.5$117.7 million, or 10.6% of sales, for the second quarter of 2019. For the first six months of 2020, segment operating profit was $108.5 million, or 6.3% of sales, compared to segment operating profit of $176.2 million, or 8.5%12.3% of sales, for the first six monthsquarter of 2019.2020. Our measure of segment operating profit,EBITDA, which we use to analyze the performance and results of our business segments, excludes all effects of last in, first out (LIFO)LIFO inventory accounting and any related changes in net realizable value (NRV) inventory reserves which offset the Company’s aggregate net debit LIFO valuation balance, income taxes, depreciation and amortization, corporate expenses, net interest expense, closed operations and other expenses,income (expense), charges for goodwill impairment,and asset impairments, restructuring and other charges, debt extinguishment charges and non-operating gains andor losses. Results on our management basis of reporting were as follows (in millions):
Three months ended March 31,Six months ended June 30,
 2020201920202019
Sales:
High Performance Materials & Components$300.7  $533.1  $721.0  $1,029.7  
Advanced Alloys & Solutions469.6  547.3  1,004.8  1,055.5  
Total external sales$770.3  $1,080.4  $1,725.8  $2,085.2  
Segment operating profit:
High Performance Materials & Components$9.2  $78.4  $66.3  $130.1  
% of Sales3.1 %14.7 %9.2 %12.6 %
Advanced Alloys & Solutions18.1  36.1  42.2  46.1  
% of Sales3.9 %6.6 %4.2 %4.4 %
Total segment operating profit$27.3  $114.5  $108.5  $176.2  
% of Sales3.5 %10.6 %6.3 %8.5 %
LIFO and net realizable value reserves$—  $—  $—  $(0.1) 
Corporate expenses(7.7) (18.0) (20.5) (34.6) 
Closed operations and other (income) expenses2.4  (7.9) (4.2) (11.0) 
Restructuring and other charges(16.7) —  (24.7) —  
Impairment of goodwill(287.0) —  (287.0) —  
Joint venture restructuring charges(2.4) —  (2.4) —  
Gain on asset sales, net—  21.6  2.5  21.6  
Debt extinguishment charge(21.5) —  (21.5) —  
Interest expense, net(21.7) (25.9) (43.6) (50.7) 
(Loss) income before income taxes$(327.3) $84.3  $(292.9) $101.4  

28
Three months ended March 31,
 20212020
Sales:
High Performance Materials & Components$240.9 $420.3 
Advanced Alloys & Solutions451.6 535.2 
Total external sales$692.5 $955.5 
EBITDA:
High Performance Materials & Components$24.6 $76.6 
% of Sales10.2 %18.2 %
Advanced Alloys & Solutions49.7 41.1 
% of Sales11.0 %7.7 %
Total segment EBITDA$74.3 $117.7 
% of Sales10.7 %12.3 %
LIFO and net realizable value reserves— — 
Corporate expenses(12.2)(12.3)
Closed operations and other income (expense)0.5 (6.3)
Total ATI Adjusted EBITDA62.6 99.1 
Depreciation & amortization(36.1)(37.3)
Interest expense, net(23.4)(21.9)
Restructuring and other charges— (8.0)
Gain on asset sales— 2.5 
Income before income taxes$3.1 $34.4 



Business Segment Results
High Performance Materials & Components Segment
SecondFirst quarter 20202021 sales were $300.7$240.9 million, decreasing 44%43% compared to the secondfirst quarter 2019, with a 5% decline from business divestitures.2020. Sales to the aerospace and defense markets which were 84% of second quarter 2020 HPMC sales, were 43%50% lower, reflecting a 50%62% decrease in sales to the commercial aerospace market resulting from the global COVID-19 pandemic. This decrease was partially offset by a 35%55% increase in government aerospace & defense market sales. Aerospace & defense markets sales were 4% lower due to 2019 business divestitures. Sales of next-generation jet engine products which represented 41% of total first second 2020quarter 2021 HPMC jet engine product sales, decreased 64% compared to the second quarter 2019 with 4% of this decline from divestitures.sales.

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Comparative information for our HPMC segment revenues (in millions) by market including divested businesses prior to sale, and their respective percentages of the segment’s overall revenues for the three month periods ended June 30,March 31, 2021 and 2020 and 2019 is as follows: 
 Three months endedThree months ended
MarketsJune 30, 2020June 30, 2019
Aerospace & Defense:
Commercial Jet Engines$141.4  47 %$295.8  55 %
Commercial Airframes62.0  21 %113.2  21 %
Government Aerospace & Defense48.9  16 %35.8  %
Total Aerospace & Defense252.3  84 %444.8  84 %
Energy*22.8  %33.4  %
Medical10.3  %21.1  %
Construction/Mining5.0  %13.4  %
Other10.3  %20.4  %
Total$300.7  100 %$533.1  100 %
*Includes the oil & gas, hydrocarbon and chemical processing, and electrical energy markets.
 Three months endedThree months ended
MarketsMarch 31, 2021March 31, 2020
Aerospace & Defense:
Jet Engines- Commercial$95.9 40 %$247.1 59 %
Airframes- Commercial26.5 11 %74.8 18 %
Defense57.4 24 %36.9 %
Total Aerospace & Defense179.8 75 %358.8 85 %
Energy:
       Oil & Gas8.3 %12.5 %
       Specialty Energy22.2 %11.6 %
       Total Energy30.5 12 %24.1 %
Medical11.2 %17.0 %
Construction/Mining5.1 %5.3 %
Other14.3 %15.1 %
Total$240.9 100 %$420.3 100 %
International sales represented 45%47% of total segment sales for the secondfirst quarter 2020.2021. Comparative information for the HPMC segment’s major product categories, including divested businesses prior to sale, based on their percentages of revenue for the three months ended June 30,March 31, 2021 and 2020, and 2019, is as follows: 
Three months ended June 30,Three months ended March 31,
20202019 20212020
High-Value ProductsHigh-Value ProductsHigh-Value Products
Precision forgings, castings and componentsPrecision forgings, castings and components43 %35 %
Nickel-based alloys and specialty alloysNickel-based alloys and specialty alloys36 %37 %Nickel-based alloys and specialty alloys36 %40 %
Precision forgings, castings and components35 %38 %
Titanium and titanium-based alloysTitanium and titanium-based alloys29 %25 %Titanium and titanium-based alloys21 %25 %
Total High-Value ProductsTotal High-Value Products100 %100 %Total High-Value Products100 %100 %
Segment operating profitEBITDA in the secondfirst quarter 20202021 decreased to $9.2$24.6 million, or 3.1%10.2% of total sales, compared to $78.4$76.6 million, or 14.7%18.2% of total sales, for the secondfirst quarter 2019.2020. Lower overall demand, including lower sales of higher-margin next-generation jet engine products, and reduced asset utilization rates negatively impacted operating margins.
Although a modest recovery has begun in the first quarter of 2021, HPMC financial results have significantly weakened in the second quarter 2020continued to experience weakness due to demand disruptions in the aerospace & defense and energy markets as a result of the COVID-19 pandemic. Most production facilities operatedcontinued to operate at lower utilization rates, leading to cost inefficiencies, along with weaker profit margins on transactional business due to intense market competition. These market conditions are presently expected to continue forthrough at least the remainderfirst half of 2020.2021.

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Sales for the first six months of 2020 were $721.0 million compared to $1.03 billion for the first six months of 2019. Declines were noted across most major markets, including a 32% decline in the commercial aerospace market, partially offset by a 19% increase in government aerospace & defense market sales. Energy markets sales were 24% lower.

Comparative information for our HPMC segment revenues (in millions) by market, including divested businesses prior to sale, and their respective percentages of the segment’s overall revenues for the six month periods ended June 30, 2020 and 2019 is as follows:
 Six months endedSix months ended
MarketsJune 30, 2020June 30, 2019
Aerospace & Defense:
Commercial Jet Engines$388.5  53 %$564.6  55 %
Commercial Airframes136.8  19 %208.7  21 %
Government Aerospace & Defense85.8  12 %72.1  %
Total Aerospace & Defense611.1  84 %845.4  83 %
Energy*46.9  %61.5  %
Medical27.3  %45.8  %
Construction/Mining10.3  %31.9  %
Other25.4  %45.1  %
Total$721.0  100 %$1,029.7  100 %
*Includes the oil & gas, hydrocarbon and chemical processing, and electrical energy markets.
International sales represented 45% of total segment sales for first six months of 2020. Comparative information for the HPMC segment’s major product categories, including divested businesses prior to sale, based on their percentages of revenue for the six months ended June 30, 2020 and 2019, is as follows:
Six months ended June 30,
 20202019
High-Value Products
Nickel-based alloys and specialty alloys38 %37 %
Precision forgings, castings and components35 %38 %
Titanium and titanium-based alloys27 %25 %
Total High-Value Products100 %100 %

Segment operating profit in the first six months of 2020 decreased to $66.3 million, or 9.2% of total sales, compared to $130.1 million, or 12.6% of total sales, for the first six months of 2019. Results for 2020 reflect lower overall demand and reduced asset utilization rates which negatively impacted operating margins. The first six months of 2019 results were impacted by unexpected short-term operational headwinds, including disruption in third party nickel powder billet supply and steep and rapid drop in cobalt prices.


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Advanced Alloys & Solutions Segment
SecondFirst quarter 20202021 sales were $469.6$451.6 million, decreasing 14%16% compared to the secondfirst quarter 2019, primarily2020. Sales to specialty energy generation markets were 8% higher compared to the prior year period, while total sales to all energy markets, which also include oil & gas and downstream processing, were 19% lower. Commercial aerospace market sales declined 51%, reflecting lower aerospace demand due to 20% declinesthe COVID-19 pandemic. Sales for electronic applications were 68% higher year-over-year, driven by demand in both the commercial aerospace marketAsia, primarily in China, and energysales of automotive markets as well as a 30% decline in the automotive market, partially offset by higher sales in the government aerospace & defense market and higher Hot-Rolling and Processing Facility (HRPF) conversion services billings.products also increased. Sales of high-value products were 8%10% lower, largely due to an 18%a 47% decline in precision rolled strip productstitanium and titanium-based alloys and a 6%24% decline in nickel-based alloys and specialty alloys.alloys, partially offset by a 25% increase in sales of precision-rolled strip products, primarily from ATI's STAL joint venture in China.

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Comparative information for our AA&S segment revenues (in millions) by market and their respective percentages of the segment’s overall revenues for the three month periods ended June 30,March 31, 2021 and 2020 and 2019 is as follows:
 Three months endedThree months ended
MarketsJune 30, 2020June 30, 2019
Energy*144.7  31 %180.0  33 %
Aerospace & Defense113.3  24 %127.4  23 %
Automotive49.8  11 %70.5  13 %
Food Equipment & Appliances47.1  10 %49.6  %
Electronics/Computers/Communication39.3  %37.8  %
Construction/Mining29.8  %39.2  %
Other45.6  10 %42.8  %
Total$469.6  100 %$547.3  100 %
*Includes the oil & gas, hydrocarbon and chemical processing, and electrical energy markets.
 Three months endedThree months ended
MarketsMarch 31, 2021March 31, 2020
Energy:
       Oil & Gas$74.2 16 %$105.6 20 %
       Specialty Energy44.4 10 %40.9 %
       Total Energy118.6 26 %146.5 27 %
Automotive89.5 20 %74.5 14 %
Aerospace & Defense:
Jet Engines- Commercial10.2 %25.1 %
Airframes- Commercial31.7 %60.3 11 %
Defense32.5 %48.3 %
Total Aerospace & Defense74.4 17 %133.7 25 %
Electronics55.3 12 %32.9 %
Construction/Mining37.4 %38.3 %
Food Equipment & Appliances35.4 %50.4 %
Other41.0 %58.9 12 %
Total$451.6 100 %$535.2 100 %
International sales represented 34%40% of total segment sales for the secondfirst quarter 2020.2021, compared to 29% in the prior year’s first quarter. Comparative information for the AA&S segment’s major product categories, based on their percentages of revenue for the three months ended June 30,March 31, 2021 and 2020, and 2019, are presented in the following table. In conjunction with the announced ongoing exit of standard stainless products, ATI reclassified certain items as High-Value Products. Prior period information reflects these reclassifications. HRPF conversion service sales are excluded from this presentation. We expect to cease production of standard stainless products by the end of fiscal year 2021.
Three months ended June 30,Three months ended March 31,
20202019 20212020
High-Value ProductsHigh-Value ProductsHigh-Value Products
Precision rolled strip productsPrecision rolled strip products31 %22 %
Nickel-based alloys and specialty alloysNickel-based alloys and specialty alloys26 %30 %Nickel-based alloys and specialty alloys28 %31 %
Precision rolled strip products19 %21 %
Zirconium and related alloysZirconium and related alloys14 %11 %Zirconium and related alloys15 %13 %
Titanium and titanium-based alloysTitanium and titanium-based alloys13 %10 %Titanium and titanium-based alloys%11 %
Total High-Value ProductsTotal High-Value Products72 %72 %Total High-Value Products81 %77 %
Standard ProductsStandard ProductsStandard Products
Standard stainless productsStandard stainless products28 %28 %Standard stainless products19 %23 %
Grand TotalGrand Total100 %100 %Grand Total100 %100 %
Segment operating profitEBITDA was $18.1$49.7 million, or 3.9%11.0% of sales, for the secondfirst quarter 2020,2021, compared to $36.1segment EBITDA of $41.1 million, or 6.6%7.7% of sales, for the secondfirst quarter 2019. AA&S2020. The improvement in segment EBITDA included $16.7 million in benefits from rising raw material prices, particularly nickel, at our Specialty Rolled Products business. Cost cutting measures enacted in 2020 continued to benefit operating margins as production volumes increased during the first quarter 2021. However, lower overall demand and reduced asset utilization rates negatively impacted operating margins. First quarter 2021 results for the second quarter 2020 compared to the prior year period reflectsalso include record earnings at our Precision Rolled Strip joint venture in China along with lower retirement benefit expense of approximately $5$3 million. Results at our Specialty Alloys & Components business improved year-over-year primarily due to government aerospace & defense sales. Results
Although a modest recovery has begun in the second quarter 2020 and 2019 also include $2.2 million and $4.0 million, respectively, in losses from the A&T Stainless joint venture operations. On March 31, 2020, ATI announced that A&T Stainless would be idling ATI’s previously idled direct roll and pickle (DRAP) facility in Midland, PA in 2020, in an orderly shut down process, due to a lack of relief from Section 232 tariffs. Operations at the DRAP facility will continue through early in the thirdfirst quarter of 2020. A $2.4 million charge for ATI’s portion of a severance charge recorded by the A&T Stainless joint venture in the second quarter 2020 was excluded from segment results.
2021, AA&S financial results have significantly weakenedcontinued to experience weakness in the secondfirst quarter 20202021 due to demand disruptions in the aerospace, energy and general industrial markets as a result of the COVID-19 pandemic. LowerMost production facilities continued to operate at lower utilization rates, have resulted at most production facilities, leading to cost inefficiencies, along with weaker profit margins due to intense market competition. These market conditions are presently expected to continue forthrough at least the remainderfirst half of 2020.2021.
Sales for the first six months of 2020 were $1.00 billion compared to $1.06 billion for the first six month of 2019. The sales decline was primarily due to an 11% decline in the commercial aerospace market, a 9% decline in the energy markets and a 14% decline in the automotive market, partially offset by higher sales in the government aerospace & defense market and


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higher HRPF conversion services billings. Sales of high-value products were 7% lower, largely due to a 13% decline in precision rolled strip products and a 12% decline in nickel-based alloys and specialty alloys.
Comparative information for our AA&S segment revenues (in millions) by market and their respective percentages of the segment’s overall revenues for the six month periods ended June 30, 2020 and 2019 is as follows:
 Six months endedSix months ended
MarketsJune 30, 2020June 30, 2019
Energy*291.2  29 %320.4  30 %
Aerospace & Defense247.0  25 %252.4  24 %
Automotive124.3  12 %143.8  14 %
Food Equipment & Appliances97.5  10 %102.7  10 %
Electronics/Computers/Communication72.2  %71.9  %
Construction/Mining68.1  %78.6  %
Other104.5  10 %85.7  %
Total$1,004.8  100 %$1,055.5  100 %
*Includes the oil & gas, hydrocarbon and chemical processing, and electrical energy markets.
International sales represented 31% of total segment sales for the first six months of 2020. Comparative information for the AA&S segment’s major product categories, based on their percentages of revenue for the six months ended June 30, 2020 and 2019, are presented in the following table. HRPF conversion service sales are excluded from this presentation.
Six months ended June 30,
 20202019
High-Value Products
Nickel-based alloys and specialty alloys25 %26 %
Precision rolled strip products21 %22 %
Zirconium and related alloys13 %12 %
Titanium and titanium-based alloys12 %11 %
Total High-Value Products71 %71 %
Standard Products
Standard stainless products29 %29 %
Grand Total100 %100 %
Segment operating profit was $42.2 million, or 4.2% of sales, for the first six months of 2020, compared to $46.1 million, or 4.4% of sales, for the first six months of 2019. AA&S segment results for the first half of 2020 compared to the prior year period reflects lower retirement benefit expense of approximately $10 million. Results at our Specialty Alloys & Components business improved year-over-year primarily due to government aerospace & defense sales. The first half of 2019 results also reflected unexpected short-term operational headwinds, including cost inefficiencies, particularly in our commodity stainless products business in the United States.
Corporate Items

There was no net effect on our results of operations for changes in LIFO and NRV inventory reserves for the second quarterfirst quarters of 2021 and six months of 2020 and2020. For the secondfirst quarter of 2019. The net effect of changes in LIFO and NRV inventory reserves for the six months of 2019 was expense of $0.1 million. For the second quarter and six months of 2020,2021, LIFO inventory valuation reserve benefitscharges of $2.0$6.8 million and $14.0 million, respectively, were offset by increasesdeclines of the same magnitude in NRV inventory reserves, which are required to offset the Company’s aggregate net debit LIFO inventory balance that exceeds current inventory replacement cost. For the secondfirst quarter and six months of 2019,2020, LIFO inventory valuation reserve chargesbenefits of $4.0$12.0 million and $5.8 million, respectively, were offset by reductionsincreases of $4.0 million and $5.9 million, respectively,the same magnitude in the NRV inventory reserves. The NRV inventory reserve balance was $37.3 million at March 31, 2021.

Corporate expenses for the secondfirst quarter of 20202021 were $7.7$12.2 million, compared to $18.0$12.3 million for the secondfirst quarter 2019. For the six months ended June 30, 2020, corporate expenses2020. Corporate administrative costs were $20.5 million, decreasing from $34.6 million for the six months ended June 30, 2019. This decrease was primarilylower in 2021 due to lowerprior cost reduction actions, while prior year first quarter corporate costs benefited from reversals of previously-recognized incentive compensation expense based on expected performance versus targeted metrics, and lower expenses resulting from cost reduction actions.
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due to COVID-19 pandemic impacts.

Closed operations and other income/expensesincome for the secondfirst quarter 20202021 was income of $2.4$0.5 million, compared to expense of $7.9$6.3 million for the secondfirst quarter 2019. For the six months ended June 30, 2020,2020. These declines reflect lower costs at closed operationsfacilities, including retirement benefit expense, insurance and legal costs, and real estate and other expenses decreasedfacility costs, and changes in foreign currency remeasurement impacts primarily related to $4.2ATI’s European Treasury operation.

The following is depreciation & amortization by each business segment:

Three months ended March 31,
20212020
High Performance Materials & Components$19.6 $19.5 
Advanced Alloys & Solutions15.5 17.0 
Other1.0 0.8 
36.1 37.3 

Interest expense, net of interest income, in the first quarter 2021 was $23.4 million, compared to $11.0net interest expense of $21.9 million for the comparable period. The secondfirst quarter of 2020, benefited by $4.3 million from settlements of contract indemnity obligations, along with foreign currency gains and lower legal, environmental, and retirement benefit costs of closed operations, compared to the prior year period.
A $16.7 million restructuring charge for voluntary and involuntary severance programs was recordedreflecting reduced interest income in the secondcurrent year quarter. Capitalized interest reduced interest expense by $1.3 million in the first quarter 2020. For2021 and $2.1 million in the six months of 2020, an additionalfirst quarter 2020.

An $8.0 million restructuring charge was recorded in the first quarter of 2020 for a voluntary retirement incentive program for eligible salaried employees. These charges are comprised of severance obligations for the elimination of approximately 550 positions for both involuntary reductions and voluntary retirement incentiveemployees, which was excluded from segment EBITDA. Cash payments associated with cost reduction programs related to both salary and hourly employeesimplemented in the HPMC segment, infourth quarter 2019 and throughout the second quarter of 2020 as well as the reduction of approximately 90 positions for a voluntary retirement incentive program for eligible salaried employeesfiscal year were $6.5 million in the first quarter of 2020. Once fully implemented,2021. The majority of the $36.9 million of remaining reserves associated with these combined cost reduction programs are expected to generate annualized benefitsas of approximately $50 million. Costs for these programsMarch 31, 2021 are expected to be paid through mid-2021 based onby the timingend of the benefits provided. In addition, the A&T Stainless joint venture recorded a $4.8 million charge in the second quarter 2020 for contractual termination benefits, and ATI recognized a $2.4 million charge in the second quarter 2020 for its equity method share of these termination benefits. These charges are excluded from segment operating results.
In the second quarter 2020, due to demand disruptions to the global commercial aerospace market resulting from the COVID-19 pandemic and changes in near-term demand requirements of aero-engine and airframe markets, ATI conducted an interim test for goodwill impairment at our Forged Products operations, and recognized a $287.0 million charge for the partial impairment of goodwill, while retaining $173.4 million of goodwill for this profitable business with good long-term growth prospects. This goodwill impairment charge is excluded from HPMC segment operating results.2021.
During the first six monthsquarter of 2020, we recognized a $2.5 million cash gain for the sale of certain oil and gas rights. This non-core asset sale gain is reported in other income/expense, net, on the consolidated statement of operationsincome and is excluded from segment operating results. During the second quarter of 2019, we completed the sale of two non-core forging facilities and recognized a $7.7 million pre-tax loss for the second quarter ended June 30, 2019 on the sale of this business. Also during the second quarter of 2019, we recognized a $29.3 million cash gain on the sale of a portion of our oil and gas rights. Second quarter 2019 results include $21.6 million in net pretax gains from these non-core asset sales which are reported in other income, net, on the consolidated statement of operations for second quarter ended June 30, 2019 and are excluded from segment operating results.

In June 2020, ATI issued $285.0 million of 3.5% Convertible Senior Notes due 2025 (the 2025 Convertible Notes), and used the majority of the proceeds to repurchase approximately $203.2 million aggregate principal amount of the outstanding principal balance of our 2022 Convertible Notes. A $21.5 million debt extinguishment charge was recognized for this action.

Interest expense, net of interest income, in the second quarter 2020 was $21.7 million, compared to net interest expense of $25.9 million for the second quarter 2019. On a year-to-date basis, net interest expense was $43.6 million for the first six months of 2020 compared to $50.7 million for the first six months of 2019. These declines are primarily resulting from the debt reduction actions taken by the Company in the fourth quarter 2019. Capitalized interest reduced interest expense by $2.4 million in the second quarter 2020 and $0.9 million in the second quarter 2019. For the six months ended June 30, 2020 and 2019, capitalized interest was $4.5 million and $1.7 million, respectively.EBITDA.
Income Taxes

The provision for income taxes for the secondfirst quarter and six months ended June 30, 2020March 31, 2021 was $92.6 million, or (28.3)%, and $103.4 million, or (35.3)%, respectively, of loss before taxes.$5.5 million. In the second quarter 2020, we recorded a $99.0 million deferred tax asset valuation allowance on our U.S. federal and state tax attributes. We entered into a three-year cumulative loss within the United States, as of June 30, 2020, limiting our ability to utilize future projections when analyzing the need for a valuation allowance, therefore limiting sources of income as part of the analysis. We continue to maintain valuation allowances on our U.S. federal and state deferred tax assets, as well as for certain foreign jurisdictions. Throughout 2020, we calculated the provision for income taxes based upon actual year to date results due to the uncertainty of future projections as a result of the global pandemic. For 2021, we continue to be unable to make a reliable estimate of the annual effective tax rate, as significant changes in projected results for our domesticU.S. operations could produce a significant variation in our annual effective tax rate. As a result, we recorded income tax for the quarter ended March 31, 2021 based upon an annual effective tax rate for our foreign, non-valuation allowance operations, combined with actual year-to-date tax expense related to our U.S. jurisdictions. The current year tax expense is mainly attributable to our foreign operations. The tax provision for the secondfirst quarter 2019 and the six months2020 ended June 30, 2019March 31, 2020 was $5.8$10.8 million, or 6.9%31.4%, and $6.6 million, or 6.5%, respectively, of income before taxes, duebased on the actual year to deferred tax asset valuation allowances in the United States.date effective rate for this period.

We have analyzed the impacts of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) that was enacted on March 27, 2020 and have determined that the impact does not result in a material income tax expense or benefit. We continue to evaluate the overall changes between the deferred tax asset classifications of interest, pension and net operating losses resulting from the CARES Act.
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Financial Condition and Liquidity

We have an Asset Based Lending (ABL) Credit Facility, which is collateralized by the accounts receivable and inventory of our domestic operations. The ABL facility, which matures in September 2024, includes a $500 million revolving credit facility, a letter of credit sub-facility of up to $200 million, and as of June 30, 2020, a $200 million term loan (Term Loan). In June 2020, we exercised our right to borrow an additional $100 million under the term loan portion of the ABL, with the same September 2024 maturity date. The Term Loan has an interest rate of 2.0% plus a LIBOR spread and can be prepaid in increments of $25 million if certain minimum liquidity conditions are satisfied. In addition, we have the right to request an increase of up to $200 million in the maximum amount available under the revolving credit facility for the duration of the ABL. We have a $50 million floating-for-fixed interest rate swap which converts a portion of the Term Loan to a 4.21% fixed interest rate. The swap matures in June 2024.
The applicable interest rate for revolving credit borrowings under the ABL facility includes interest rate spreads based on available borrowing capacity that range between 1.25% and 1.75% for LIBOR-based borrowings and between 0.25% and 0.75% for base rate borrowings. The ABL facility contains a financial covenant whereby we must maintain a fixed charge coverage ratio of not less than 1.00:1.00 after an event of default has occurred and is continuing or if the undrawn availability under the ABL revolving credit portion of the facility isis less than the greater of (i) $87.5 million, calculated as 12.5% of the then applicable maximum advance amount under the revolving credit portion of the ABL and the outstanding Term Loan balance, or (ii) $62.5 million. We were in compliance with thedid not meet this required fixed charge coverage ratio covenant at June 30, 2020.March 31, 2021. As a result, we are unable to access this remaining 12.5%, or $87.5 million, of the ABL facility until we meet the required ratio. Additionally, we must demonstrate minimum liquidity, as calculated in accordance with the terms of the ABL facility, during the 90-day period immediately preceding the stated maturity date of the 4.75%2022 Convertible Notes due 2022 and the 5.875% Notes due 2023. The ABL also contains customary affirmative and negative covenants for credit facilities of this type, including limitations on our ability to incur additional indebtedness or liens or to enter into investments, mergers and acquisitions, dispositions of assets and transactions with affiliates, some of which are more restrictive at any time during the term of the ABL when our fixed charge coverage ratio is less than 1.00:1.00 and its undrawn availability under the revolving portion of the ABL is less than the greater of (a) $150 million or (b) 30% of the sum of the maximum advance amount under the revolving credit portion of the ABL and the outstanding Term Loan balance.
As of June 30, 2020,March 31, 2021, there were no outstanding borrowings under the revolving portion of the ABL facility, and $35.2$42.8 million was utilized to support the issuance of letters of credit. There were no average revolving credit borrowings under the ABL facility for the first quarter of 2021. There were average revolving credit borrowings of $58$53 million bearing an average annual interest rate of 2.2%2.6% under the ABL facility for the first six monthsquarter of 2020. There were no average revolving credit borrowings for the first six months of 2019.
In June 2020, we issued and sold $285.0 million aggregate principal amount of 2025 Convertible Notes. We used a portion of the net proceeds from the offering of the 2025 Convertible Notes to repurchase $203.2 million aggregate principal amount of our outstanding 2022 Convertible Notes. We also used $19.0 million of the net proceeds of the offering of the 2025 Convertible Notes to pay the cost of capped call transactions, which effectively increase the initial conversion price of the 2025 Convertible Notes into ATI stock from $15.49 per share to $19.76 per share. The remainder of the net proceeds from the offering will be used for general corporate purposes.
At June 30, 2020,March 31, 2021, we had $539$542 million of cash and cash equivalents, and available additional liquidity under the ABL facility of approximately $460$360 million, for total liquidity of $1 billion.approximately $900 million. We do not expect to pay any significant U.S. federal or state income taxes in the next several years due to net operating loss carryforwards.

Our fiscal year 2020 funding requirements to the U.S. qualified defined benefit pension plans are approximately $130 million, of which $28 million was contributed in the first six months of 2020. The recently-enacted CARES Act legislation provides for near-term deferral of required qualified defined benefit pension plan contributions from interim 2020 dates until the end of the year. We deferred making a scheduled April 15 contribution during the second quarter 2020, and may elect to defer other scheduled interim contributions within fiscal year 2020 as permitted by the CARES Act. We contributed $17.5 million to our U.S. qualified defined benefit pension trust as scheduledplans in July 2020.the first quarter of 2021. As a result of the American Rescue Plan Act (ARPA) enacted in March 2021, the rules governing pension funding calculations have changed. As presently adopted by ATI, pending additional IRS guidance, we are not required to make any additional contributions to these pension plans during fiscal year 2021, and our prior contributions have generated a credit balance that may be utilized to offset future minimum required contributions. Prior to the ARPA changes, our fiscal year 2021 funding requirements were approximately $87 million. Using our long-term weighted average expected rate of return on pension plan assets of 7.16%6.78%, we now expect to have average annual minimum funding requirements of approximately $85$10 million to these pension plans for the next few years after 2020.2021, a significant decrease from the prior $50 million average annual estimate over that period. However, these estimates are subject to significant uncertainty, including the performance of our pension trust assets and the discount rates used to measure pension liabilities. Pension trust asset performance for bothWe may elect to contribute additional amounts to these pension plans to improve their funded position, or we may elect to use a portion of our accounting and ERISA funding calculations is determined using the market valuecredit balance in lieu of plan assets at the end of each year. A significant decline in our pension plans’ funded status at year-end 2020 as measured under ERISA could require additional pensioncash contributions starting in the third quarter of 2021.based on other capital allocation priorities.
We believe that internally generated funds, current cash on hand and available borrowings under the ABL facility will be adequate to meet our liquidity needs, including currently projected required contributions to our pension plans. If we needed to obtain additional financing using the credit markets, the cost and the terms and conditions of such borrowings may be influenced by our credit rating. In addition, we regularly review our capital structure, various financing alternatives and conditions in the debt and equity markets in order to opportunistically enhance our capital structure. In connection therewith, we may seek to refinance or retire existing indebtedness, incur new or additional indebtedness or issue equity or equity-linked securities, in each case, depending on market and other conditions.
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We have no off-balance sheet arrangements as defined in Item 303(a)(4) of SEC Regulation S-K.

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Cash Flow and Working Capital

For the sixthree months ended June 30, 2020,March 31, 2021, cash used in operations was $14.4$68.1 million, primarily due to an $84.2 million increase in managed working capital related to increased business activity. Other significant 2021 operating cash flow items included $17.5 million in contributions to a $90U.S. defined benefit pension plan and payment of 2020 annual incentive compensation, partially offset by receipt of an advance payment as part of a long-term supply agreement in 2021. The cash used in operations of $115.4 million improvement overfor the comparable prior year periodthree months ended March 31, 2020 was largely due to lowera $134.7 million use of cash from changes inhigher managed working capital. Other significant 2020 items includedcapital balances from increased business activity, $27.9 million in contributions to a U.S. defined benefit pension plan, and payment of 2019 annual incentive compensation. The cash used in operations of $104.4 million for the six months ended June 30, 2019 included a $53.0 million contribution to a U.S. defined benefit pension plan and $36 million in short-term working capital advances to the A&T Stainless joint venture.

As part of managing the liquidity of our business, we focus on controlling managed working capital, which is defined as gross accounts receivable, short-term contract assets and gross inventories, less accounts payable and short-term contract liabilities. In measuring performance in controlling managed working capital, we exclude the effects of LIFO and other inventory valuation reserves, and reserves for uncollectible accounts receivable which, due to their nature, are managed separately. We measure managed working capital as a percentage of the prior three months annualized sales to evaluate our performance based on recent levels of business volume. At June 30, 2020,March 31, 2021, managed working capital increased to 43.2%as a percentage of annualized total ATI sales to 41.5% compared to 30.0% of annualized sales40.5% at December 31, 2019. Annualized three-month sales declined while overall managed working capital balances increased versus year-end 2019.2020. The $106.5$84.2 million increase in managed working capital at June 30, 2020March 31, 2021 from December 31, 2019 resulted from a $3.1 million increase2020 is detailed in short-term contract assets and a $245.4 million decrease in accounts payable, partially offset by a $70.6 million decrease in accounts receivable, a $40.3 million decrease in inventory and a $31.1 million increase in short-term contract liabilities.the table below. Days sales outstanding, which measures actual collection timing for accounts receivable, worsened by 12%was consistent as of June 30, 2020March 31, 2021 compared to year end 2019. No significant accounts receivable collection issues are expected despite the increase in this metric.2020. Gross inventory turns, which exclude the effect of LIFO and any applicable offsetting NRV inventory valuation reserves, improved by 17%were also consistent as of June 30, 2020March 31, 2021 compared to year end 2019. This working capital balance was a source of $28.2 million in cash for the second quarter of 2020 and is expected to continue to be a source of cash for the rest of 2020 as our level of operating activity decreases in response to lower customer demand.2020.

The components of managed working capital at June 30, 2020March 31, 2021 and December 31, 20192020 were as follows: 
June 30,December 31,March 31,December 31,
(In millions)(In millions)20202019(In millions)20212020
Accounts receivableAccounts receivable$483.6  $554.1  Accounts receivable$423.9 $345.8 
Short-term contract assetsShort-term contract assets41.6  38.5  Short-term contract assets42.0 38.9 
InventoryInventory1,103.5  1,155.3  Inventory1,047.8 997.1 
Accounts payableAccounts payable(275.8) (521.2) Accounts payable(324.8)(290.6)
Short-term contract liabilitiesShort-term contract liabilities(109.8) (78.7) Short-term contract liabilities(118.7)(111.8)
SubtotalSubtotal1,243.1  1,148.0  Subtotal1,070.2 979.4 
Allowance for doubtful accountsAllowance for doubtful accounts4.5  4.6  Allowance for doubtful accounts4.2 4.3 
Adjustment from current cost to LIFO cost basis
Adjustment from current cost to LIFO cost basis
(47.6) (33.6) Adjustment from current cost to LIFO cost basis
(37.3)(44.1)
Inventory valuation reservesInventory valuation reserves129.6  104.1  Inventory valuation reserves113.6 126.9 
Managed working capitalManaged working capital$1,329.6  $1,223.1  Managed working capital$1,150.7 $1,066.5 
Annualized prior 3 months salesAnnualized prior 3 months sales$3,081.2  $4,074.4  Annualized prior 3 months sales$2,770.0 $2,633.2 
Managed working capital as a % of annualized salesManaged working capital as a % of annualized sales43.2 %30.0 %Managed working capital as a % of annualized sales41.5 %40.5 %
Change in managed working capital from December 31, 2019$106.5  
Change in managed working capital from December 31, 2020Change in managed working capital from December 31, 2020$84.2 
Cash used in investing activities was $61.8$25.1 million in the first sixthree months of 2020,2021, reflecting $66.0$26.4 million in capital expenditures partially offset by $3.2 million of proceeds from property, plant and equipment sales, largely due to the sale of certain oil and gas rights. Capital expenditures in 2020 primarily are related to HPMC growth projects including the new iso-thermal press and heat-treating expansion in Cudahy, WI. We expect to fund our capital expenditures with cash on hand and cash flow generated from our operations and, if needed, by using a portion of the ABL facility.
Cash provided byused in financing activities was $124.5$11.0 million in the first halfquarter of 2020 and consisted primarily of $285.0 million of borrowings for the 2025 Convertible Notes issued in June 2020 and $100.0 million of additional Term Loan borrowings under the ABL. These were offset by a $203.2 million repayment for a portion of the 2022 Convertible Notes and $19.1 million cash make-whole payment related to the early extinguishment of these 2022 Convertible Notes as required by the applicable indenture, as well as $19.0 million to pay the cost of capped call transactions and $8.1 million for debt issuance costs, both associated with the newly issued 2025 Convertible Notes.
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2021.
At June 30, 2020,March 31, 2021, cash and cash equivalents on hand totaled $539.1$541.7 million, an increasea decrease of $48.3$104.2 million from year end 2019.2020. Cash and cash equivalents held by our foreign subsidiaries was $69.5$87.6 million at June 30, 2020,March 31, 2021, of which $34.9$34.1 million was held by the STAL joint venture.

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Debt
Total debt outstanding of $1,596.1$1,629.2 million at June 30, 2020 increased $184.9 millionMarch 31, 2021 was consistent compared to December 31, 2019, as $285.0 million of borrowings for the 2025 Convertible Notes issued in June 2020, a portion of which is required to be recorded in stockholders’ equity as discussed further below, and $100.0 million of additional Term Loan borrowings under the ABL were partially offset by a $203.2 million repayment for a portion of the 2022 Convertible Notes.2020. Total debt outstanding as described above excludes debt issuance costs and the December 31, 2020 amount includes $46.8 million for the $50.3 millionunamortized balance of the portion of the 2025 Convertible Notes that is required to be classifiedrecorded in stockholders’ equity due to the flexible settlement feature availableof the notes. ATI adopted new accounting guidance in 2021 that reclassifies this portion of the 2025 Convertible Notes recorded in stockholders’ equity to ATI on conversion.long-term debt (see below for further discussion).
In managing our overall capital structure, some of the measures on which we focus are debt to EBITDA, which measures our ability to repay our incurred debt, net debt to total capitalization, which is the percentage of our debt, net of cash that may be available to reduce borrowings, to our total invested and borrowed capital, and total debt to total capitalization, which excludes cash balances. We define EBITDA as income from continuing operations before interest and income taxes, plus depreciation and amortization, goodwill impairment charges and debt extinguishment charges for the latest 12 month period. We define Adjusted EBITDA as EBITDA excluding significant charges or credits, restructuring charges, long-lived asset impairments and other postretirement/pension curtailment and settlement gains and losses. We believe that EBITDA and Adjusted EBITDA are useful to investors because these measures are commonly used to analyze companies on the basis of operating performance, leverage and liquidity. Furthermore, analogous measures are used by industry analysts to evaluate operating performance. EBITDA and Adjusted EBITDA are not intended to be measures of free cash flow for management’s discretionary use, as they do not consider certain cash requirements such as interest payments, tax payments and capital expenditures. EBITDA and Adjusted EBITDA are not intended to represent, and should not be considered more meaningful than, or as alternatives to, a measure of operating performance as determined in accordance with U.S. generally accepted accounting principles.
All of these leverage ratios worsened in 2020,2021, primarily as a result of lower earnings. As of June 30, 2020,March 31, 2021, as calculated on a twelve month trailing basis, our debt to Adjusted EBITDA ratio was 3.48,10.20, compared to 2.678.30 at December 31, 2019,2020, and net debt to Adjusted EBITDA ratio was 2.30,6.81, compared to 1.745.01 at December 31, 2019.2020.
Three months endedLatest 12 months endedFiscal year ended
June 30, 2020June 30, 2019June 30, 2020December 31, 2019
(Loss) income before income taxes$(327.3) $84.3  $(152.7) $241.6  
Interest expense21.7  25.9  91.9  99.0  
Depreciation and amortization35.6  38.9  146.4  151.1  
Restructuring charge16.7  —  29.2  4.5  
Joint venture restructuring and impairment charges2.4  —  13.8  11.4  
Impairment of goodwill287.0  —  287.0  —  
Debt extinguishment charge21.5  —  43.1  21.6  
Adjusted EBITDA$57.6  $149.1  $458.7  $529.2  
Total debt (a)$1,596.1  $1,411.2  
Less: Cash(539.1) (490.8) 
Net debt$1,057.0  $920.4  
Debt to Adjusted EBITDA3.48  2.67  
Net Debt to Adjusted EBITDA2.30  1.74  
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Three months endedLatest 12 months endedFiscal year ended
March 31, 2021March 31, 2020March 31, 2021December 31, 2020
Income (loss) before income taxes$3.1 $34.4 $(1,513.2)$(1,481.9)
Interest expense23.4 21.9 95.9 94.4 
Depreciation and amortization36.1 37.3 142.1 143.3 
Restructuring and other charges— 8.0 1,124.1 1,132.1 
Joint venture restructuring charge— — 2.4 2.4 
Impairment of goodwill— — 287.0 287.0 
Debt extinguishment charge— — 21.5 21.5 
Gain on asset sales— (2.5)— (2.5)
Adjusted EBITDA$62.6 $99.1 $159.8 $196.3 
Total debt (a)$1,629.2 $1,629.1 
Less: Cash(541.7)(645.9)
Net debt$1,087.5 $983.2 
Debt to Adjusted EBITDA10.20 8.30 
Net Debt to Adjusted EBITDA6.81 5.01 
Net debt as a percentage of total capitalization was 38.5%69.2% at June 30, 2020,March 31, 2021, compared to 30.6%67.6% at December 31, 2019.2020, reflecting lower cash balances.
 
(In millions)(In millions)June 30, 2020December 31, 2019(In millions)March 31, 2021December 31, 2020
Total debt (a)Total debt (a)$1,596.1  $1,411.2  Total debt (a)$1,629.2 $1,629.1 
Less: CashLess: Cash(539.1) (490.8) Less: Cash(541.7)(645.9)
Net debtNet debt$1,057.0  $920.4  Net debt$1,087.5 $983.2 
Total ATI stockholders’ equity (b)Total ATI stockholders’ equity (b)1,686.6  2,090.1  Total ATI stockholders’ equity (b)482.9 471.3 
Net ATI total capitalNet ATI total capital$2,743.6  $3,010.5  Net ATI total capital$1,570.4 $1,454.5 
Net debt to ATI total capitalNet debt to ATI total capital38.5 %30.6 %Net debt to ATI total capital69.2 %67.6 %

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Total debt to total capitalization of 48.6%77.1% at June 30, 2020 increasedMarch 31, 2021 decreased slightly from 40.3%77.6% at December 31, 2019.2020.
(In millions)(In millions)June 30, 2020December 31, 2019(In millions)March 31, 2021December 31, 2020
Total debt (a)Total debt (a)$1,596.1  $1,411.2  Total debt (a)$1,629.2 $1,629.1 
Total ATI stockholders’ equity (b)Total ATI stockholders’ equity (b)1,686.6  2,090.1  Total ATI stockholders’ equity (b)482.9 471.3 
Total ATI capitalTotal ATI capital$3,282.7  $3,501.3  Total ATI capital$2,112.1 $2,100.4 
Total debt to total ATI capitalTotal debt to total ATI capital48.6 %40.3 %Total debt to total ATI capital77.1 %77.6 %
(a) Excludes debt issuance costs for both periods. The June 30,December 31, 2020 debt carrying value includes $46.8 million for the unamortized balance includes $50.3 million recorded in stockholders’ equity for aof the portion of the 2025 Convertible Notes recorded in stockholders’ equity due to the flexible settlement feature of the notes. New accounting guidance adopted by ATI on January 1, 2021 eliminated this requirement of separately accounting for this component of the 2025 Convertible Notes in stockholders’ equity. See below for further discussion.
(b) The June 30,December 31, 2020 balance excludes $48.7$49.8 million recorded in stockholders’ equity for a portion of the 2025 Convertible Notes, net of debt issuance costs. See below for further discussion.

In JuneDuring 2020, we issued and sold $285.0 million aggregate principal amount of the 2025 Convertible Notes. We granted the underwriters a 13-day option to purchase up to an additional $40.0$291.4 million aggregate principal amount of 2025 Convertible Notes on the same terms and conditions to cover over-allotments, if any. The underwriters exercised a portion of this option on June 30, 2020, and we completed the offering and sale of an additional $6.4 million aggregate principal amount of 2025 Convertible Notes on July 2, 2020, subsequent to the end of the second quarter 2020. Interest on the 2025 Convertible Notes at the 3.5% cash coupon rate is payable semi-annually in arrears on each June 15 and December 15, commencing December 15, 2020.

We used a portion of the net proceeds from the offeringNotes. Conversions of the 2025 Convertible Notes to repurchase $203.2 million aggregate principal amount of our outstanding 2022 Convertible Notes, resulting in a $21.5 million debt extinguishment charge, which included a $19.1 million cash make-whole payment related to the early extinguishment of the 2022 Convertible Notes as required by the applicable indenture, and a $2.4 million charge for deferred debt issue costs. We also used $19.0 million of the net proceeds of the offering of the 2025 Convertible Notes to pay the cost of capped call transactions, described below, which was recorded as a reduction to additional paid-in-capital in stockholders’ equity on the consolidated balance sheet. The remainder of the net proceeds from the offering will be used for general corporate purposes.

The 2025 Convertible Notes are convertible into our common stock at an initial conversion price of $15.49 per share and may be settled in cash, shares of ourATI’s common stock or a combination thereof, at ourATI’s election. As a result of this flexible settlement feature of the 2025 Convertible Notes, the embedded conversion option valued at $50.3 million iswas required to be separately accounted for as a component of stockholders’ equity. ThisThe value of the embedded conversion option was determined to be $51.4 million based on the estimated fair value of comparable senior unsecured debt without the conversion feature, using an income approach of expected present value. During the 2020 fiscal year, the equity component will bewas amortized as additional non-cash interest expense, commonly referred to as phantom yield, over the term of the 2025 Convertible Notes. IncludingNotes using the effective interest method. As a result, as of December 31, 2020, $49.8 million of the 2025 Convertible Notes was recorded in additional paid-in-capital in stockholders’ equity ($51.4 million of the gross $291.4 million, net of $1.6 million of allocated offering costs). Due to the non-cash phantom yield and including debt issue cost amortization, the 2025 Convertible Notes will havehad reported interest expense in 2020 at an 8.4% rate, higher than the 3.5% cash coupon rate. Effective January 1, 2021, ATI early-adopted new accounting guidance as discussed in Note 1 that eliminated the equity component classification of the embedded conversion option, as well as the phantom yield portion of interest expense on a prospective basis. Upon adoption on January 1, 2021, long-term debt increased by $45.4 million, representing the $46.8 million equity component of convertible debt as of December 31, 2020, net of reclassified debt issue costs.

In connectionLabor Matters
Our collective bargaining agreement (CBA) with the pricingUnited Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied & Industrial Service Workers International Union, AFL-CIO, CLC (USW) involving approximately 1,100 active full-time represented employees located primarily within the AA&S segment operations, as well as a number of the 2025 Convertible Notes, we entered into privately negotiated capped call transactions with certain of the initial purchasers or their respective affiliates (collectively, the Counterparties). The capped call transactions are expected generallyinactive employees, expired on February 28, 2021. USW-represented employees continued to reduce potential dilution to our common stock upon any conversion of the 2025 Convertible Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted 2025 Convertible Notes, as the case may be, with such reduction and/or offset subject to a cap based on the cap price. The cap price of the capped call transactions initially is approximately $19.76 per share, and is subject to adjustmentswork under the terms of the capped call transactions. We entered into additional capped call transactionsexpired CBA until March 30, 2021 when they engaged in a strike, which remains ongoing. ATI continues to negotiate in good faith with the Counterparties relatedUSW in an attempt to the additional $6.4 million aggregate principal amount of the 2025 Convertible Notes issued on July 2, 2020, subsequent to the end of the second quarter 2020.

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reach a new labor agreement.
Dividends
Effective with the fourth quarter of 2016, our Board of Directors decided to suspend the quarterly dividend. The payment of dividends and the amount of such dividends depends upon matters deemed relevant by our Board of Directors on a quarterly basis, such as our results of operations, financial condition, cash requirements, future prospects, any limitations imposed by law, credit agreements or senior securities, and other factors deemed relevant and appropriate. Under the ABL facility, there is no limit on dividend declarations or payments provided that the undrawn availability, after giving effect to a particular dividend payment, is at least the greater of $150 million and 30% of the sum of the maximum revolving advance amount and the outstanding principal amount of any term loans (the Maximum Loan Amount), and no event of default under the ABL facility has occurred and is continuing or would result from paying the dividend.  In addition, there is no limit on dividend declarations or payments if the undrawn availability is less than the greater of $150 million and 30% of the Maximum Loan Amount but more than the greater of $75 million and 15% of the Maximum Loan Amount, if (i) no event of default has occurred and is continuing or would result from paying the dividend, and (ii) we demonstrate to the administrative agent that, prior to and after giving effect to the payment of the dividend (A) the undrawn availability, as measured both at the time of the dividend payment and as an average for the 60 consecutive day period immediately preceding the dividend payment, is at least the greater of $75 million and 15% of the Maximum Loan Amount, and (B) we maintain a fixed charge coverage ratio of at least 1.00:1.00, as calculated in accordance with the terms of the ABL facility.
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Critical Accounting Policies
Inventory
At June 30, 2020,March 31, 2021, we had net inventory of $1,103.5$1,047.8 million. Inventories are stated at the lower of cost (LIFO, first-in, first-out (FIFO) and average cost methods) or market. Costs include direct material, direct labor and applicable manufacturing and engineering overhead, and other direct costs. Most of our inventory is valued utilizing the LIFO costing methodology. Inventory of our non-U.S. operations is valued using average cost or FIFO methods. Under the LIFO inventory valuation method, changes in the cost of raw materials and production activities are recognized in cost of sales in the current period even though these material and other costs may have been incurred at significantly different values due to the length of time of our production cycle. In a period of rising prices, cost of sales expense recognized under LIFO is generally higher than the cash costs incurred to acquire the inventory sold. Conversely, in a period of declining raw material prices, cost of sales recognized under LIFO is generally lower than cash costs incurred to acquire the inventory sold. Generally, over time based on overall inflationary trends in raw materials, labor and overhead costs, the use of the LIFO inventory valuation method will result in a LIFO inventory valuation reserve, as the higher current period costs are included in cost of sales and the balance sheet carrying value of inventory is reduced.
Since the LIFO inventory valuation methodology is designed for annual determination, interim estimates of the annual LIFO valuation are required. We recognize the effects of the LIFO inventory valuation method on an interim basis by projecting the expected annual LIFO cost and allocating that projection to the interim quarters equally. These projections of annual LIFO inventory valuation reserve changes are updated quarterly and are evaluated based upon material, labor and overhead costs and projections for such costs at the end of the year plus projections regarding year end inventory levels.
The prices for many of the raw materials we use have been extremely volatile during the past several years, while labor and overhead costs have been generally stable, with a modest inflationary trend. Raw material cost changes typically have the largest impact on the LIFO inventory costing methodology based on the overall proportion of raw material costs to other inventoriable costs. Since we value most of our inventory utilizing the LIFO inventory costing methodology, a fall in material costs generally results in a benefit to operating results by reducing cost of sales and increasing the inventory carrying value, while conversely, a rise in raw material costs generally has a negative effect on our operating results by increasing cost of sales while lowering the carrying value of inventory. For example, for the sixthree months ended June 30,March 31, 2021 and 2020, and 2019, the LIFO inventory valuation method resulted in cost of sales that were $14.0$6.8 million higher and $5.8$12.0 million lower, respectively, than would have been recognized under the FIFO methodology to value our inventory.

Due primarily to persistent raw material deflation in prior years, we are in the unusual situation of having a LIFO inventory balance that exceeds replacement cost. In cases where inventory at FIFO cost is lower than the LIFO carrying value, a write-down of the inventory to market may be required, subject to a lower of cost or market evaluation. In applying the lower of cost or market principle, market means current replacement cost, subject to a ceiling (market value shall not exceed net realizable value) and a floor (market shall not be less than net realizable value reduced by an allowance for a normal profit margin). We evaluate product lines on a quarterly basis to identify inventory values that exceed estimated net realizable value. The calculation of a resulting NRV inventory reserve, if any, is recognized in the period that the need for the reserve is identified. Our NRV reserves were $47.6$37.3 million at June 30, 2020March 31, 2021 and $33.6$44.1 million at December 31, 2019.
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2020.
The impact to our cost of sales for changes in the LIFO costing methodology and associated NRV inventory reserves were as follows (in millions):
Six months ended June 30,
20202019
LIFO benefit$14.0  $5.8  
NRV charge(14.0) (5.9) 
Net cost of sales impact$—  $(0.1) 
Three months ended March 31,
20212020
LIFO benefit (charge)$(6.8)$12.0 
NRV benefit (charge)6.8 (12.0)
Net cost of sales impact$— $— 
It is our general policy to write-down to scrap value any inventory that is identified as obsolete and any inventory that has aged or has not moved in more than twelve months. In some instances this criterion is up to 24 months due to the longer manufacturing and distribution process for such products.
The LIFO inventory valuation methodology is not utilized by many of the companies with which we compete, including foreign competitors. As such, our results of operations may not be comparable to those of our competitors during periods of volatile material costs due, in part, to the differences between the LIFO inventory valuation method and other acceptable inventory valuation methods.
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Asset Impairment
We monitor the recoverability of the carrying value of our long-lived assets. An impairment charge is recognized when the expected net undiscounted future cash flows from an asset’s use (including any proceeds from disposition) are less than the asset’s carrying value, and the asset’s carrying value exceeds its fair value. Changes in the expected use of a long-lived asset group, and the financial performance of the long-lived asset group and its operating segment, are evaluated as indicators of possible impairment. Future cash flow value may include appraisals for property, plant and equipment, land and improvements, future cash flow estimates from operating the long-lived assets, and other operating considerations. In the fourth quarter of each year in conjunction with the annual business planning cycle, or more frequently if new material information is available, we evaluate the recoverability of idled facilities.

Goodwill is reviewed annually in the fourth quarter of each year for impairment or more frequently if impairment indicators arise. Other events and changes in circumstances may also require goodwill to be tested for impairment between annual measurement dates. At June 30, 2020,March 31, 2021, we had $236.4$241.6 million of goodwill on our consolidated balance sheet, allan increase of which relates to the HPMC segment. Goodwill decreased $289.4$0.9 million at June 30, 2020 compared tofrom December 31, 2019,2020 due to a $287.0 million interim impairment charge in the HPMC segment and $2.4 million from the impact of foreign currency translation on goodwill denominated in functional currencies other than the U.S. dollar. All goodwill relates to reporting units in the HPMC segment.

During the second quarterManagement concluded that none of 2020, we performedATI’s reporting units or long-lived assets experienced any triggering event that would have required an interim goodwill impairment analysis on the Forged Products reporting unit and its $460.4 million goodwill balance based on assessed potential indicators of impairment, including recent disruptions to the global commercial aerospace market resulting from the COVID-19 pandemic, and the increasing uncertainty of near-term demand requirements of aero-engine and airframe markets based on government responses to the pandemic and ongoing interactions with customers. In the previous 2019 annual goodwill impairment evaluation, this reporting unit had a fair value that exceeded carrying value by approximately 30%. As a result of the second quarter 2020 interim goodwill impairment evaluation, we determined that the fair value of the Forged Products reporting unit was below carrying value, including goodwill, by $287.0 million. This was primarily due to changes in the timing and amount of expected cash flows resulting from lower projected revenues, profitability and cash flows due to near-term reductions in commercial aerospace market demand.Consequently, during the second quarter of 2020, we recorded a $287.0 million impairment charge for the partial impairment of Forged Products reporting unit goodwill, most of which was assigned from the Company’s 2011 Ladish acquisition that was not deductible for income tax purposes.

For the 2020 interim impairment analysis fair value was determined by a quantitative assessment that used a discounted cash flow technique, which represents Level 3 unobservable information in the fair value hierarchy. The impairment assessment and valuation method require us to make estimates and assumptions regarding future operating results, cash flows, changes in working capital and capital expenditures, selling prices, profitability, and the cost of capital. Many of these assumptions are determined by reference to market participants we have identified. For example, our weighted average cost of capital used in our discounted cash flow assessment was 11.6%, and long-term growth rate was 3.5%. Although we believe that the estimates and assumptions used were reasonable, actual results could differ from those estimates and assumptions.

The $236.4 million of goodwill remaining as of June 30, 2020 on our consolidated balance sheet is comprised of $173.4 million at Forged Products and $63.0 million at Specialty Materials, both of which are profitable businesses with good long-term
39


growth prospects. No indicators of impairment were observed in the second quarter 2020 associated with any other of the Company’s long-lived assets. Market conditions and additional changes in the operating rate of our HRPF, including joint venture and third-party conversion volumes, may require an evaluation of impairment and it is possible that an impairment charge for this long-lived asset group may be required. The HRPF, located in Brackenridge, PA, and which primarily uses a units-of-production depreciation method, has an approximate carrying value of $1.3 billion.March 31, 2021.

Income Taxes
The provision for, or benefit from, income taxes includes deferred taxes resulting from temporary differences in income for financial and tax purposes using the liability method. Such temporary differences result primarily from differences in the carrying value of assets and liabilities. Future realization of deferred income tax assets requires sufficient taxable income within the carryback and/or carryforward period available under tax law. On a quarterly basis, we evaluate the realizability of our deferred tax assets.
The evaluation includes the consideration of all available evidence, both positive and negative, regarding historical operating results including recent years with reported losses, the estimated timing of future reversals of existing taxable temporary differences, estimated future taxable income exclusive of reversing temporary differences and carryforwards, and potential tax planning strategies which may be employed to prevent an operating loss or tax credit carryforward from expiring unused. In situations where a three-year cumulative loss condition exists, accounting standards limit the ability to consider projections of future results as positive evidence to assess the realizability of deferred tax assets. Valuation allowances are established when it is estimated that it is more likely than not that the tax benefit of the deferred tax asset will not be realized. In
Since the second quarter of 2020, our results reflected a three year cumulative loss from U.S. operations. As a result, we recorded a $99.0 millionestablished deferred tax asset valuation allowanceallowances in the second quarter of 2020 on our U.S. federalFederal and state deferred tax attributes. We entered intoassets. In 2021, ATI continues to maintain income tax valuation allowances on its U.S. Federal and state deferred tax assets. In addition, we have $45.4 million of valuation allowances on amounts recorded in other comprehensive loss as of March 31, 2021.
While we remain in a three-year cumulative loss within the United States as of June 30, 2020, limitingcondition, our ability to utilize future projections when analyzingevaluate the needrealizability of deferred tax assets is generally limited to the ability to offset timing differences on taxable income associated with deferred tax liabilities. Therefore, a change in estimate of deferred tax asset valuation allowances for a valuation allowance therefore limiting sources of income as partfederal, state, or foreign jurisdictions during this cumulative loss condition period will primarily be affected by changes in estimates of the analysis.time periods that deferred tax assets and liabilities will be realized, or on a limited basis to tax planning strategies that may result in a change in the amount of taxable income realized.

On March 27, 2020,Over the past year, the U.S. government has enacted the CARES Act, which includes certain income tax changes,various relief packages in response to the COVID-19 pandemic. We have determined thatDue to our valuation allowance in the CARES Act changes do not result in a materialU.S., the impact to income tax expense or benefit to ATI.has been minimal. We are continuing to evaluate the overall changes between the deferredcurrently assessing payroll tax asset classifications of interest, pension and net operating losses resulting from the CARES Act.refund opportunities.
Retirement Benefits
In accordance with accounting standards, we determine the discount rate used to value pension plan liabilities as of the last day of each year. The discount rate reflects the current rate at which the pension liabilities could be effectively settled. In estimating this rate, we receive input from our actuaries regarding the rate of return on high quality, fixed income investments with maturities matched to the expected future retirement benefit payments. Based on current market conditions, discount rates are below the rates in effect at the year-end 2019 remeasurement date, when a 3.40% discount rate was used for valuing pension liabilities. The estimated effect at the year-end 20192020 valuation date of a decreasean increase in the discount rate by 0.50% would increasedecrease pension liabilities by approximately $140$155 million. The effect on pension liabilities for changes to the discount rate, the difference between expected and actual plan asset returns,
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and the net effect of other changes in actuarial assumptions and experience are deferred and amortized over future periods in accordance with accounting standards.

For ERISA (Employee Retirement Income Security Act of 1974, as amended) funding purposes, discount rates used to measure pension liabilities for U.S. qualified defined benefit plans are calculated on a different basis using an IRS-determined segmented yield curve, which currently results in a higher discount rate than the discount rate methodology required by accounting standards. Funding requirements are also affected by IRS-determined mortality assumptions, which may differ from those used under accounting standards.

We have certain CBAs that include participation in a multiemployer pension plan. Under current law, an employer that withdraws or partially withdraws from a multiemployer pension plan may incur a withdrawal liability to the plan, which represents the portion of the plan’s underfunding that is allocable to the withdrawing employer under very complex actuarial and allocation rules. A subsidiary of the Company participates in the Steelworkers Western Independent Shops Pension Plan (WISPP) for union-represented employees of our primary titanium operations in Albany, OR, which is funded on an hours-worked basis. A significant reduction or the elimination of hours-worked contributions due to changes in operating rates at this facility could result in a withdrawal liability assessment. As of the WISPP fiscal plan year ended September 30, 2018, which is the most recent information available from the Plan Administrator, our subsidiary’s liability for a complete withdrawal was estimated by the Plan Administrator to be approximately $38 million on an undiscounted basis. If the withdrawal liability was incurred, we estimate that payments of this obligation would be required on a straight-line basis over a 20 year period.

Other Critical Accounting Policies
A summary of other significant accounting policies is discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Note 1 to the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2019.2020.
The preparation of the financial statements in accordance with U.S. generally accepted accounting principles requires us to make judgments, estimates and assumptions regarding uncertainties that affect the reported amounts of assets and liabilities. Significant areas of uncertainty that require judgments, estimates and assumptions include the accounting for derivatives, retirement plans, income taxes, environmental and other contingencies as well as asset impairment, inventory valuation and collectability of accounts receivable. We use historical and other information that we consider to be relevant to make these judgments and estimates. However, actual results may differ from those estimates and assumptions that are used to prepare our financial statements.
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Pending Accounting Pronouncements

See Note 1 of the Notes to Consolidated Financial Statements for information on new and pending accounting pronouncements.
Forward-Looking and Other Statements
From time to time, we have made and may continue to make “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Certain statements in this report relate to future events and expectations and, as such, constitute forward-looking statements. Forward-looking statements include those containing such words as “anticipates,” “believes,” “estimates,” “expects,” “would,” “should,” “will,” “will likely result,” “forecast,” “outlook,” “projects,” and similar expressions. Forward-looking statements are based on management’s current expectations and include known and unknown risks, uncertainties and other factors, many of which we are unable to predict or control, that may cause our actual results, performance or achievements to differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include: (a) material adverse changes in economic or industry conditions generally, including global supply and demand conditions and prices for our specialty metals and changes in international trade duties and other aspects of international trade policy; (b) material adverse changes in the markets we serve; (c) our inability to achieve the level of cost savings, productivity improvements, synergies, growth or other benefits anticipated by management, from strategic investments and the integration of acquired businesses; (d) volatility in the price and availability of the raw materials that are critical to the manufacture of our products; (e) declines in the value of our defined benefit pension plan assets or unfavorable changes in laws or regulations that govern pension plan funding; (f) labor disputes or work stoppages; (g) equipment outages; (h) the risks of business and economic disruption related to the currently ongoing COVID-19 pandemic and other health epidemics or outbreaks that may arise; and (i) other risk factors summarized in our Annual Report on Form 10-K for the year ended December 31, 2019,2020, and in other reports filed with the Securities and Exchange Commission. We assume no duty to update our forward-looking statements.
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Item 3.Quantitative and Qualitative Disclosures About Market Risk
As part of our risk management strategy, we utilize derivative financial instruments, from time to time, to hedge our exposure to changes in energy and raw material prices, foreign currencies, and interest rates. We monitor the third-party financial institutions which are our counterparties to these financial instruments on a daily basis and diversify our transactions among counterparties to minimize exposure to any one of these entities. Fair values for derivatives were measured using exchange-traded prices for the hedged items including consideration of counterparty risk and the Company’s credit risk. Our exposure to volatility in interest rates is presently not material, as nearly all of our debt is at fixed interest rates.
Volatility of Interest Rates. We may enter into derivative interest rate contracts to maintain a reasonable balance between fixed- and floating-rate debt. The Company has a $50 million floating-for-fixed interest rate swap which converts a portion of the Term Loan to a 4.21% fixed rate. The swap matures in June 2024. The Company designated the interest rate swap as a cash flow hedge of the Company’s exposure to the variability of the payment of interest on a portion of its Term Loan borrowings. The ineffectiveness at hedge inception, determined from the fair value of the swap immediately prior to its July 2019 amendment, will bewas amortized to interest expense over the initial Term Loan swap maturity date of January 12, 2021. Any gain or loss associated with this hedging arrangement is included in interest expense. At June 30, 2020,March 31, 2021, the net mark-to-market valuation of the outstanding interest rate swap was an unrealized pre-tax loss of $4.2$2.7 million, comprised of $1.1$1.0 million in other current liabilities and $3.1$1.7 million in other long-term liabilities on the balance sheet.
Volatility of Energy Prices. Energy resources markets are subject to conditions that create uncertainty in the prices and availability of energy resources. The prices for and availability of electricity, natural gas, oil and other energy resources are subject to volatile market conditions. These market conditions often are affected by political and economic factors beyond our control. Increases in energy costs, or changes in costs relative to energy costs paid by competitors, have and may continue to adversely affect our profitability. To the extent that these uncertainties cause suppliers and customers to be more cost sensitive, increased energy prices may have an adverse effect on our results of operations and financial condition. We use approximately 85 to 107 million MMBtu’s of natural gas annually, depending upon business conditions, in the manufacture of our products. These purchases of natural gas expose us to risk of higher gas prices. For example, a hypothetical $1.00 per MMBtu increase in the price of natural gas would result in increased annual energy costs of approximately $8$5 to $10$7 million. We use several approaches to minimize any material adverse effect on our results of operations or financial condition from volatile energy prices. These approaches include incorporating an energy surcharge on many of our products and using financial derivatives to reduce exposure to energy price volatility.
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At June 30, 2020,March 31, 2021, the outstanding financial derivatives used to hedge our exposure to energy cost volatility included natural gas hedges. Approximately 100%75% of our forecasted domestic requirements for natural gas for the remainder of 20202021 and approximately 60%25% for 20212022 are hedged. At June 30, 2020,March 31, 2021, the net mark-to-market valuation of these outstanding natural gas hedges was an unrealized pre-tax lossgain of $2.6$0.5 million, comprised of $0.1$0.5 million in prepaid expenses and other current assets, $2.5$0.1 million in other current liabilitieslong-term assets, and $0.2$0.1 million in other long-termcurrent liabilities on the balance sheet. For the three months ended June 30, 2020,March 31, 2021, natural gas hedging activity increasedhad no impact on cost of sales by $1.3 million.sales.
Volatility of Raw Material Prices. We use raw materials surcharge and index mechanisms to offset the impact of increased raw material costs; however, competitive factors in the marketplace can limit our ability to institute such mechanisms, and there can be a delay between the increase in the price of raw materials and the realization of the benefit of such mechanisms. For example, in 2019,2020, we used approximately 10550 million pounds of nickel; therefore, a hypothetical change of $1.00 per pound in nickel prices would result in increased costs of approximately $105$50 million. In addition, in 2019,2020, we also used approximately 360300 million pounds of ferrous scrap in the production of our flat-rolled products; a hypothetical change of $0.01 per pound would result in increased costs of approximately $3.6$3.0 million. While we enter into raw materials futures contracts from time-to-time to hedge exposure to price fluctuations, such as for nickel, we cannot be certain that our hedge position adequately reduces exposure. We believe that we have adequate controls to monitor these contracts, but we may not be able to accurately assess exposure to price volatility in the markets for critical raw materials.

The majority of our products are sold utilizing raw material surcharges and index mechanisms. However, as of June 30, 2020,March 31, 2021, we had entered into financial hedging arrangements, primarily at the request of our customers, related to firm orders for an aggregate notional amount of approximately 56 million pounds of nickel with hedge dates through 2023. The aggregate notional amount hedged is less thanapproximately 10% of a single year’s estimated nickel raw material purchase requirements. Any gain or loss associated with these hedging arrangements is included in cost of sales. At June 30, 2020,March 31, 2021, the net mark-to-market valuation of our outstanding raw material hedges was an unrealized pre-tax gain of $0.3$1.6 million, comprised of $1.2$2.1 million in
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prepaid expense and other current assets, $0.2$0.4 million in other long-term assets, $0.8and $0.9 million in other current liabilities and $0.3 million in other long-term liabilities on the balance sheet.
Foreign Currency Risk. Foreign currency exchange contracts are used, from time-to-time, to limit transactional exposure to changes in currency exchange rates. We sometimes purchase foreign currency forward contracts that permit us to sell specified amounts of foreign currencies expected to be received from our export sales for pre-established U.S. dollar amounts at specified dates. The forward contracts are denominated in the same foreign currencies in which export sales are denominated. These contracts are designated as hedges of the variability in cash flows of a portion of the forecasted future export sales transactions which otherwise would expose the Company to foreign currency risk, primarily the euro. In addition, we may also hedge forecasted capital expenditures and designate cash balances held in foreign currencies as hedges of forecasted foreign currency transactions. At June 30, 2020,March 31, 2021, we had no significant outstanding foreign currency forward contracts.
We may also enter into foreign currency forward contracts that are not designated as hedges, which are denominated in the same foreign currency in which export sales are denominated. We have no euro notional value outstanding as of June 30, 2020 of foreign currency forward contracts not designated as hedges.
Item 4.Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer have evaluated the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of June 30, 2020,March 31, 2021, and they concluded that these disclosure controls and procedures are effective.
(b) Changes in Internal Controls
There was no change in our internal controls over financial reporting identified in connection with the evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of June 30, 2020March 31, 2021 conducted by our Chief Executive Officer and Chief Financial Officer, that occurred during the quarter ended June 30, 2020March 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION
Item 1.Legal Proceedings
A number of lawsuits, claims and proceedings have been or may be asserted against the Company relating to the conduct of its currently or formerly owned businesses, including those pertaining to product liability, environmental, health and safety matters and occupational disease (including as each relates to alleged asbestos exposure), as well as patent infringement, commercial, government contracting, construction, employment, employee and retiree benefits, taxes, environmental, and stockholder and corporate governance matters. Certain of such lawsuits, claims and proceedings are described in our Annual Report on Form 10-K for the year ended December 31, 2019,2020, and addressed in Note 1715 to the unaudited interim financial statements included herein. While the outcome of litigation cannot be predicted with certainty, and some of these lawsuits, claims or proceedings may be determined adversely to the Company, management does not believe that the disposition of any such pending matters is likely to have a material adverse effect on the Company’s financial condition or liquidity, although the resolution in any reporting period of one or more of these matters could have a material adverse effect on the Company’s results of operations for that period.
Allegheny Technologies Incorporated and its subsidiary, ATI Titanium LLC (“ATI Titanium”), are parties to a lawsuit captioned US Magnesium, LLC v. ATI Titanium LLC (Case No. 2:17-cv-00923-DB) and filed in federal district court in Salt Lake City, UT, pertaining to a Supply and Operating Agreement between US Magnesium LLC (“USM”) and ATI Titanium entered into in 2006 (the “Supply Agreement”). In 2016, ATI Titanium notified USM that it would suspend performance under the Supply Agreement in reliance on certain terms and conditions included in the Supply Agreement. USM subsequently filed a claim challenging ATI Titanium’s right to suspend performance under the Supply Agreement, claiming that such suspension was a material breach of the Supply Agreement and seeking monetary damages, and ATI Titanium filed a counterclaim for breach of contract against USM. In 2018, USM obtained leave of the court to add Allegheny Technologies Incorporated as a separate party defendant, and ATI Titanium filed a motion to dismiss the claim against Allegheny Technologies Incorporated, which the court denied on April 19, 2019. The case is proceeding through discovery, and whileNo trial date has been set by the court given the restrictions of the pandemic. While ATI intends to vigorously defend against and pursue these claims, it cannot predict their outcomes at this time.
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Item 1A.Risk Factors
The following is an update to, and should be read in conjunction with Item 1A. Risk Factors contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.2020. In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019,2020, which could materially affect our business, financial condition or future results.  The risks described in our Annual Report on Form 10-K are not the only risks facing our Company.  Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
Our business, resultsLabor Matters. We have approximately 6,500 active employees, of operations, financial condition and/or cash flows couldwhich approximately 20% are located outside the United States. Approximately 40% of our workforce is covered by various CBAs, predominantly with the USW. At various times, our CBAs expire and are subject to renegotiation.

Generally, CBAs that expire may be materially adversely affectedterminated after notice by the effects of widespread public health epidemics/pandemics, including COVID-19 andunion. After termination, the union may authorize a strike. A labor dispute, which could lead to a strike, lockout, or other global economic trends, that are beyond our control.
The recent novel strain of COVID-19 now affectingwork stoppage by the global community on a pandemic basis is adversely impacting our operations, and the nature and extentemployees covered by one or more of the impact over time is highly uncertain and beyond our control. The pandemic, including governmental and other actions taken or restrictions imposed to contain its spread and impact, has subjected our operations, financial performance and financial condition to a number of risks, including, but not limited to those discussed below.
Customer, Supply Chain and Operational Risks: The significant macroeconomic impact of the ongoing COVID-19 pandemic and the measures designed to contain its spread have impacted several of the Company’s end markets. We are experiencing, and expect to continue to experience, lower demand and volume for certain products and services, but we have limited visibility into future demand given the disruptions affecting customers in those markets.
A significant portion of the sales of our HPMC segment represents products sold to customers in the commercial aerospace industry. In recent months, several of our commercial aerospace customers have announced cost-cutting and other measures in response to declining demand stemming from the COVID-19 pandemic, including facility shut-downs, measures to reduce inventory and/or downward adjustments to their stated production rates.
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Similarly, the energy market, including oil and gas, historically has been a significant end market for both our HPMC segment and FRP business. In recent years, our business has at times been negatively impacted by the downturn and slow recovery in the oil and gas industry. In general, the oil and gas industry is highly cyclical and subject to volatility as a result of worldwide economic activity and associated demand for oil and natural gas, anticipated future prices for oil and natural gas, fluctuation in the level of drilling activity, changes in applicable regulation, global geopolitical conditions and numerous other factors. Demand for our products is likewise subject to these trends. Energy demand, in general, is currently predicted to remain weak due to declines in consumer activity and over-supply issues suppressing oil and gas exploration and production activities, and we expect that oil and gas will remain a highly cyclical industry.
These aerospace market and energy market conditions are presently expected to continue for at least the remainder of 2020, and the ultimate breadth and duration of these actions and trends and their impact on our business is uncertain and difficult to predict. Our sales, particularly to customers in these markets that are affected by COVID-19, have been and are expected to be negatively impacted, and the possibility exists that there could be a sustained impact to our operations and our financial results. While we have already begun implementing plans to reduce capital expenditures, compensation expense and other costs, and to align with current and anticipated changes in customer demand, we cannot predict the duration and longer-term impacts of the pandemic, and over time, its impact on demand for our products and other disruptionsCBAs, could have a material adverse effect on our business, results of operations, financial condition and/production at one or cash flows.
Additionally, our suppliers may not have the materials, capacity, or capability to manufacture our products according to our schedule and specifications. To date, we have not experienced significant disruption to our supply chain. If our suppliers’ operations were to be impacted, we may need to seek alternate suppliers, which may be more expensive, may not be available or may result in delays in shipments to us and subsequently to our customers, each of which would affect our business, results of operations, financial condition and/or cash flows.
Our facilities continue to operate with federal and state government approvals due to the qualification of our facilities as essential and, critical. However, it is possible that we may temporarily shut down facilities in response to employees being impacted by COVID-19depending upon the length of such dispute or changes in government policy. Furthermore, we have instituted a number of short-term idlings at certain manufacturing locations, and future idlings may occur, including as may be necessary to matchwork stoppage, on our production levels to the reduced demand from our customers.
Market and Credit Risks: The current financial market dynamics and volatility pose heightened risks to our liquidity. For example, dramatically lowered interest rates and lower expected asset valuations and returnsoperating results. There can materially impact the calculation of long-term liabilities such as our pension. Moreover, there can also be no assurance that we will not face credit rating downgrades as a result of weaker than anticipated performance of our businesses or other factors including overall market conditions. Future downgrades could further adversely affect our cost of funds and related margins, liquidity, competitive position and accesssucceed in concluding CBAs to capital markets, and a significant downgrade could have an adverse commercial impact on our businesses. Conditions in the financial and credit markets may also limit the availability of funding or increase the cost of funding (including for receivables securitization or supply chain finance programs used to finance working capital) or our ability to refinance certain of our indebtedness, which could adversely affect our business, financial position, results of operations and/or cash flows.
General Uncertainty: The COVID-19 pandemic may also exacerbate other risks disclosed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019. We expectreplace those that the longer the period of disruption from COVID-19 continues, the more material the adverse impacts will be on our business operations, financial performance, results of operations and/or cash flows. In addition, the impact of the COVID-19 pandemic is fluid and continues to evolve. Consequently, the pandemic may ultimately affect our operating and financial results in a manner that is not presently known to us or that we currently do not expect to present significant risks to our business, results of operations, financial conditions and/or cash flows.expire.






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The Company’s CBA with the USW involving approximately 1,100 active full-time represented employees located primarily within the AA&S segment operations, as well as a number of inactive employees, expired on February 28, 2021. USW-represented employees continued to work under the terms of the expired CBA until March 30, 2021 when they engaged in a strike, which remains ongoing. ATI continues to negotiate in good faith with the USW in an attempt to reach a new labor agreement.


Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

Set forth below is information regarding the Company’s stock repurchases during the period covered by this report, comprising shares repurchased by ATI from employees to satisfy employee-owed taxes on share-based compensation.
PeriodTotal Number of Shares (or Units) PurchasedAverage Price Paid per Share (or Unit)Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or ProgramsMaximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
April 1-30, 20202,526  $8.44  —  $—  
May 1-31, 2020—  $—  —  $—  
June 1-30, 2020—  $—  —  $—  
Total2,526  $8.44  —  $—  
PeriodTotal Number of Shares (or Units) PurchasedAverage Price Paid per Share (or Unit)Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or ProgramsMaximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
January 1-31, 2021907 $16.69 — $— 
February 1-28, 2021186,458 $21.06 — $— 
March 1-31, 202136,631 $20.69 — $— 
Total223,996 $20.98 — $— 

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Item 6.Exhibits
(a) Exhibits
4.110.1


4.2


10.1
10.2
31.1
31.2
32.1
101.INSInline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHInline XBRL Taxonomy Extension Schema Document.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.
104Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
ALLEGHENY TECHNOLOGIES INCORPORATED
(Registrant)
 
Date:August 4, 2020April 29, 2021By/s/ Donald P. Newman
 Donald P. Newman
 Senior Vice President, Finance and Chief Financial Officer
(Principal Financial Officer)
Date:August 4, 2020April 29, 2021By/s/ Karl D. Schwartz
 Karl D. Schwartz
 Vice President, Controller and Chief Accounting Officer
(Principal Accounting Officer)
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